Often, spouses need to realize they have legal obligations to each other, such as a fiduciary duty. California Family Code 721 describes the fiduciary responsibilities of spouses. If either spouse breaches their fiduciary duty, legal remedies are available.
In a California divorce, spouses have the legal right to half of the community estate. If their acts or omissions impair the other spouse's community property interest, they have breached a fiduciary duty to that spouse.
Thus, the injured spouse has a claim in a family law court against the offending spouse for the breach. There are many examples, but one of the most common includes fraudulently transferring or concealing community assets. In other words, a “breach of fiduciary duty” in a California divorce means one spouse taking advantage of the other.
Fraudulent transfer means transferring an asset to someone else without getting a fair market value in return., such as transferring an asset to a family member or friend. This means to hide an asset or claim it's not marital property.
To conceal means hiding an asset, such as when a spouse takes ownership of an asset to their name when the other spouse does not know it exists.
Another typical example is one spouse taking financial advantage in transactions involving assets, property, or commercial real estate they own.
Suppose one spouse sells a community asset without the other spouse's consent, such as real or personal property. In that case, it could be a breach of fiduciary duty.
Notably, a breach of fiduciary duty does not always involve assets. For example, a spouse could borrow against marital property without their spouse's permission.
However, many California family laws are not always clear and concise, including some rules on a fiduciary duty breach. This is why you must seek legal guidance from a California family law attorney. Let's review this topic in more detail below.
What Does the Law Say?
California Family Code 720 says, “Spouses contract toward each other obligations of mutual respect, fidelity, and support.”
California Family Code 721 says, “…in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations. This 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, such as the following...”
(1) Providing each spouse access at all times to any books kept regarding a transaction for the purposes of inspection and copying. (2) Rendering true and complete information affecting any transaction that concerns the community property… (3) Accounting to the spouse and holding as a trustee any benefit or profit derived from any transaction by one spouse without the consent of the other spouse that concerns the community property.”
Notably, other laws related to fiduciary duty include Family Code 1100, that deal with community property transactions, Family Code 1101, dealing with punishments for any violations; and Family Code 1102, dealing with real property.
Family Code 1100(b) says, “A spouse may not make a gift of community personal property, or dispose of community personal property for less than fair and reasonable value, without the other spouse's written consent.”
What Are Some Examples of a Breach of Fiduciary Duty?
California law says neither spouse can take advantage of the other. Thus, a breach of fiduciary duty could include the following;
- Concealing community property from the other spouse;
- Hiding assets from the other spouse;
- Dissipation of marital assets;
- Intentional mismanagement of community assets;
- Failure to accurately list all assets;
- Failing to value a business or professional practice accurately;
- Selling marital assets without permission;
- Giving away community assets to a family member;
- Refusing to allow a spouse to see financial documentation;
- Using marital money to pay separate debts;
- Transmuting the character of community property to separate;
- Lying to a spouse to get them to sign a deed removing their name from marital property.
California Divorce Proceedings
During the divorce proceedings in California, each spouse must disclose their assets and debts. Thus, it's crucial, to be honest with this financial information. Unfortunately, it's standard for spouses to hide or waste marital assets.
Providing sufficient evidence to prove that a breach of fiduciary duty has occurred is challenging. So, you will need an experienced family law lawyer for legal guidance and help you prepare litigation if you need to.
California family law courts consider a breach of fiduciary duty a severe matter. The injured spouse could be awarded compensation for the amount the breaching spouse misappropriated in money, property, or other marital assets.
Sometimes, harsher consequences may be enforced against the breaching spouse in more severe cases, such as the injured spouse being awarded a complete particular community asset.
For example, suppose a spouse attempts to transfer a jointly owned property to themselves. The court could fully award the injured spouse this real estate property in that case.
Divorce Judgment
After the marriage dissolution process, spouses will have a divorce judgment they must follow. It will include court orders related to child support, custody, property division, etc.
This means the now-divorced couple will remain financially linked until their children become adults and support payments are terminated.
California Family Code 3664 says former spouses receiving or paying support can request updated financial information once every twelve months.
However, California courts have held that after the judgment of dissolution or a final settlement agreement, former spouses no longer owe each other continuing fiduciary duties.
Thus, former spouses are not automatically legally obligated to disclose any significant change in their financial situation. Instead, a request has to be made for a spouse to disclose any change to their financial situation.
If you have valid reasons to believe your spouse is breaching their fiduciary duties, contact our law firm to review the details and legal options.
Our California Certified Family Law Specialist can discuss your assets and debts and provide legal representation in a divorce. We have litigated disputes related to financial disclosure and fiduciary obligations for many years.
Furman & Zavatsky are Los Angeles family law attorneys providing legal representation across Southern California. You can contact us for a free case consultation by phone or use the contact form.
