Washington

Co-mingling Assets is Breach of Fiduciary Duty

The Restatement 2d of Agency, § 398 provides:

Unless otherwise agreed, an agent receiving or holding things on behalf of the principal is subject to a duty to the principal not to receive or deal with them so that they will appear to be his own, and not so to mingle them with his own things as to destroy their identity. 

Restatement 2d of Trusts, § 179 explains the fiduciary duty this way:

The trustee is under a duty to the beneficiary to keep the trust property separate from his individual property, and, so far as it is reasonable that he should do so, to keep it separate from other property not subject to the trust, and to see that the property is designated as property of the trust. 

Unless the fiduciary can show that no harm resulted from his co-mingling, he is liable for breach of fiduciary duty. The Supreme Court in In the Matter of the Estate of Jones v. Jones, 152 Wn.2d 1; 93 P.3d 147 (2004) stated:

The trial court found that Russell Jones breached his fiduciary duty by commingling his personal funds and estate funds. CP at 98, Finding of Fact 12; CP at 105, Conclusion of Law 10. An executor should keep trust funds in a bank account and not commingle them with his own money. In re Estate of Snyder, 122 Wash. 65, 68, 209 P. 1074 (1922). However, ultimately, if all funds are accounted for, the executor is not guilty of misconduct and the beneficiaries are not injured.