Breach of Spousal Fiduciary Duty

Just like business partners, spouses owe each other certain fiduciary duties, or legal obligations to act in another party’s interest. In the context of marriage, this means that each spouse owes the duties of mutual respect, fidelity, and support. This may sound rather unimpressive, but as it turns out this is an area of family law that has spouses who lie to conceal things from their spouses very worried indeed.

The California legislature has defined the fiduciary relationship between husband and wife to include all the duties owed by non-marital business partners, which includes the duties to:

  • Provide at all times access to financial records;
  • Provide, upon request, any information about transactions involving community property; and
  • Account to, and hold as trustee for, the other spouse any benefit or profit derived from transactions involving community property.

The full text of the statute dealing with spousal fiduciary duties can be found in section 721(b) of the California Family Code.

More generally, these fiduciary duties require each spouse to act in good faith toward one another. Some situations may arise when either the husband or wife uses their separate property to make investments, knowing that it will only benefit them to the detriment of the community. In these transactions, the law presumes that the transaction is the result of undue influence, and the party who received the benefit needs to show that the transaction was freely and voluntarily consented to by the other spouse.

Remedies for Breach of Fiduciary Duty

If your spouse has breached their marital fiduciary duty, the non-breaching spouse has the right to file a civil action. While these actions are rarely filed during the marriage, they often arise when either spouse files for divorce.

In situations where one spouse’s interest in the community estate is impaired by a breach of fiduciary duty, the family court may order an accounting of the property. If the court determines that an asset was undisclosed or that there was a breach of fiduciary duty, it could result in a penalty to the offending spouse, including the possibility that the offending spouse loses all interest in the subject asset, depending on whether there is evidence of fraud or malice. These penalties may be awarded in addition to attorney’s fees and costs.

A marital fiduciary duty is a complex area of law that requires careful examination of the marital estate by both attorneys and accountants. Since these types of actions are not common, many attorneys are not familiar with spousal fiduciary duty. However, the inexperience of your attorney may result in you not getting your fair share of the community estate, so be sure to ask if you are interviewing attorneys for your divorce if the lawyer has experience litigating fiduciary duty cases; it may make a significant difference in your settlement.

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