Understanding Commingling: The Trust Account Violation Attorneys Most Often Commit by Accident

What Commingling Actually Means

Commingling refers to any mixing of client funds with attorney or firm funds. Under bar rules, these two categories of money must always be held in completely separate accounts. Client funds go into the IOLTA trust account. Firm operating funds — fee income, business expenses — stay in the operating account. The moment those two pools mix, you have a commingling violation.

What makes commingling particularly dangerous: it can happen in both directions, and both are violations.

Direction 1: Firm Money Into Trust

The most common accidental commingling involves depositing operating funds into trust. This happens when:

• An earned fee check is deposited into trust instead of operating
• A firm expense reimbursement is deposited to trust
• A bank fee or service charge is paid from operating and "reimbursed" via a deposit to trust
• Personal funds are deposited to cover an anticipated trust disbursement

Some states allow a small amount of firm money in the trust account as a "cushion" against bank service charges — but only a minimal amount, and only for that specific purpose. Check your state's rule. In most states, the cushion is $100–$250 maximum.

Direction 2: Client Money Into Operating

This is the more serious direction — and the one the bar treats most harshly. It happens when:

• An advance retainer is deposited into the operating account before it's earned
• Settlement proceeds are deposited to operating and the client's share is disbursed from there
• A flat fee is deposited to operating even though some portion is for future work

Even when unintentional and immediately corrected, depositing client funds into an operating account can trigger a formal bar proceeding.

The Accidental Negative Balance Problem

A subtler form of commingling: disbursing more for one client than that client's available balance. If Client A has $5,000 in trust and Client B has $2,000, and you accidentally disburse $6,000 for Client A, you've just used $1,000 of Client B's money to fund Client A's disbursement. This is commingling at the sub-ledger level — and it's the reason negative client ledger balances are treated as serious violations regardless of intent.

Prevention Is the Only Reliable Strategy

Because commingling is so frequently accidental, prevention is more effective than detection. IOLTATrusts prevents it at the point of entry: the software blocks any disbursement that would take a client's sub-ledger below zero. If you try to disburse $6,000 from an account with $5,000 in that matter, the system stops the transaction before it posts.

For the operating/trust separation problem, the discipline is simpler: never deposit any check into the wrong account, and never pay any expense from the wrong account. The software can't enforce which account you use at the bank — but it can flag unusual patterns and make your sub-ledger discrepancies immediately visible every month.