Commingling Law & Legal Definition


Commingling is the act of mixing the funds belonging to one party with those of another party, especially when one party has responsibility to keep the funds separate for the other party. Spouses or business partners may legally commingle funds. However, a spouse who commingles funds may risk turning separate property into community property, and a business partner may have to account to the other. For example, if someone places non-marital funds, such as an inheritance, into a joint account the property is commingled. Generally, when a new asset is acquired through a combination of marital and non-marital property, there is a loss of identity and the property will be treated as marital. In business, the mixing of customer account securities with those in a bank or brokerage's own accounts is usually illegal.

Trustees, guardians or lawyers holding client funds have a duty not to commingle those funds with their own, since commingling is generally prohibited as a conflict of interest. Use of commingled funds for an investment, even though it might benefit both the trustee and the beneficiary, is still improper. To avoid commingling, trustees, lawyers, guardians and those responsible for another's funds set up trust accounts for funds of another.