Schwartz & Ponterio, PLLC holds lawyers responsible for legal malpractice.

Commingling funds is a serious violation of client trust

On Behalf of | Nov 19, 2019 | Legal Malpractice

One kind of legal malpractice that you should know about is called commingling. Commingling is when a legal professional mingles their own funds with their beneficiary’s, client’s, ward’s or employer’s funds. Under the Rules of Professional Conduct, it is illegal to do this and subject to disciplinary action.

Mishandling a client’s funds is a serious problem for an attorney. Stealing a client’s money is obviously malpractice, but there are also other situations that can lead to malpractice claims.

How does commingling happen?

Attorneys who commingle funds may do so by using only one bank account for all their business and personal activities. Normally, funds for clients need to be held in separate bank accounts.

How do attorneys generally prevent commingly funds?

There are different ways to prevent clients’ funds from being commingled with attorneys’ funds, but one good way is to use a client trust. When a client makes a payment, like a retainer, or a settlement is received, those funds can be added to the trust. Once the attorney knows exactly which portion they’re to be paid and invoice the client, the money can be taken from the trust.

This is a fairly simple way to avoid mixing funds at any time. Remember, if an attorney does say that they have a trust, there should be no ATM card linked to the account, so that the records are clear when money is transferred in or out of the trust.

Overall, if you plan to work with an attorney and expect money to exchange hands, it’s best if you ask about an attorney-client trust fund or other ways that your attorney prevents the commingling of funds.

What happens if you’re a victim of commingling?

If you’ve received a settlement but later find that an attorney was pulling funds from it for their own personal use or that funds you deposited were being submitted straight into an attorney’s personal account, then it’s time to look into a malpractice case. Attorneys know better than to commingle funds and are aware of the rules of conduct that they need to follow. It’s unethical to use a client’s money for personal uses prior to being paid, and no attorney should be spending funds directly from a trust without good record-keeping to back up the withdrawal and show its legitimacy.

If you believe you’ve been a victim, then you may want to reach out to an attorney about filing a claim.