What are spousal Fiduciary Duties?
In the State of California spouses and domestic partners owe one another statutory fiduciary duties that arise from the confidential relationship created by their marriage when it comes to financial transactions. Financial transactions not only include income, bank accounts and property they also include debt incurred. California Fam. Code § 721(b) states “… 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 nonmarital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code”
As you can see from the quoted Family Law Code section under the code the parties are treated as if they are business partners under the California Corporations Code. As a result the spouse that is managing a transaction owes a fiduciary duty to the other spouse. In addition, there is a rebuttable presumption of undue influence whenever the managing spouse receives a benefit that does not benefit the community as a whole (an equal benefit to both spouses).
What kinds of transactions could be considered to benefit one spouse?
- Transactions dealing with money. For example one spouse transferring community property funds into a bank account to which only that spouse has access and is not used for the benefit of the community or intended to benefit the community.
- Transactions dealing with property real or person property. For example putting community property in the spouses name alone with the intent to deprive the other spouse of the benefit of the property.
- Transactions dealing with credit and/debt. For example putting all the debt or credit in the name of the other spouse so that the other spouse is liable for all the debt, which the other spouse has not knowingly agreed to.
The spouse that is claiming that the fiduciary duty has been violated has the burden of proving to the court that a violation has occurred. If that spouse is able to convince the court that the other spouse violated his/her fiduciary duty that court can then either set-aside transactions, order that title be transferred, order an off-set to the harmed spouse from community property, or issue a judgment against the offending spouse. In addition Family Code Section 1101(b) provides that the court can award “…to the other spouse of 100 percent, or an amount equal to 100 percent, of any asset undisclosed or transferred in breach of the fiduciary duty.” This means that if the court finds that the other spouse intentionally breached or fraudulently intended to conceal the money or property then the court can award all of that property to harmed spouse despite the rule of equal division as a penalty to the guilty spouse.
Can a breach of the fiduciary duty happen after separation?
Yes. It does not matter if the breach occurred during marriage or after the separation. The fiduciary duty continues until all assets and liabilities of the community have been divided by the parties or the court. [See Family Code Section 1100(e)]
The area of spousal / marital fiduciary duty is a complex area that you should not try to tackle alone. You should retain or consult with a Family Law Attorney to deal with spousal fiduciary duty issues.