Fiduciary Duties of Spouses in California Divorce

Many are unaware of the fiduciary duties of spouses. Many wonder, do spouses have certain duties to each other when dealing with the issue of finances and the family estate? What happens if one spouse violates his or her fiduciary duty? We have the answers for you.

What Is Each Spouses Fiduciary Duty In California?

In California, spouses occupy a confidential relationship with each other and are subject to the general rules governing fiduciary relationships. This confidential relationship imposes a duty of the highest “good faith” and “fair dealing “on each spouse, and neither shall take any unfair advantage of the other. This confidential relationship is a fiduciary relationship subject to the same rights and duties of non-martial business partners.

Do Fiduciary Duty Laws Apply to Both Separate and Community Property?

The fiduciary duty laws between spouses in California apply to both the community property and to the other spouse’s separate property. In the instance that one spouse is managing or controlling the other spouse’s separate property, the controlling or managing spouse has to treat that property with the same care as a fiduciary would.

Does The Fiduciary Duties Between Spouses Last Forever?

The fiduciary duties between spouses do not last forever. The duty is imposed during the marriage and after separation. The fiduciary duties stop at the date of distribution of the assets, or if applicable, the debt or liability that was divided. Once the division takes place, each spouse has complete management and control over his/her own designated property. The final division traditionally takes place when the divorce is finalized. The biggest takeaway is that a spouse’s fiduciary duty to one another last until all the property, asset, debt or liability is formally divided.

Do Fiduciary Duties Include Disclosures?

This is crucial! The California Family Code requires “immediate, full and accurate” disclosures. Both community property and separate property must be disclosed. Additionally, the disclosure laws also require spouses to update the disclosures when material changes occur. Upon request, the managing spouse MUST provide full disclosure to the other spouse of all information regarding the community property and the other spouse needs full access to information about assets and debts of the community when requested.

Breach of Fiduciary Duty

During a divorce, it’s not unusual for one spouse to try to retain more assets than they’re entitled to. According to California Family Code, if this result in impairment of the other spouse’s 50% interest in community property, then they have a claim for breach of fiduciary duty.

The breach of fiduciary duties comes with harsh consequences. Failure to comply with the California Family Code, can lead to the following:

  • Monetary Sanctions
  • Payment of the other party’s attorney fees and costs
  • 50% of the value of an intentionally undisclosed asset
  • 100% of an undisclosed asset if the court finds it was done with malice, oppression or fraud
  • Prevents the non-compliant spouse from presenting evidence regarding the omitted asset in his or her case in court
  • Can set-aside a judgment that was entered as a result of a party’s failure to comply with the disclosure statutes or intentionally omitted assets

Finally, it is important to remember that each spouse has a fiduciary duty of good faith and fair dealing, which shields either spouse from taking advantage of the other. Also, it is important to remember to disclose everything to your spouse because there are severe consequences for the breach of fiduciary duties. If there is one word to take away from this post, it would be DISCLOSE everything!

Contact Us Today To Get Started On Your Case