What Are Spousal Fiduciary Duties in California?
In financial and property transactions with third parties and each other, spouses owe one another important statutory duties that create huge responsibilities and pitfalls. As between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relations with each other. "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." Family Code section 721(b).
The essence of the "fiduciary relationship" is that the parties are treated under the law as though they do not deal with each other on equal terms because one person (typically the managing spouse) accepts the trust and confidence of the other and so is in a superior position to exert influence over the dependent party. A presumption of undue influence arises whenever either party benefits from a transaction.
In 2002 Family Code section 721 was amended to expand this confidential fiduciary relationship and impose the same rights and duties as applies to non-marital business partners under the California Corporations Code. A number of important disclosure and accounting obligations thereby arise.
While Section 721 does not mention Registered Domestic Partners, it applies to such persons as well.
Transactions Benefiting One Spouse
For divorcing couples, this means:
a) If one party has benefited in a transaction involving money or property and so obtained an advantage during the course of the marriage, the law presumes the advantage was gained through undue influence vis-a-vis the other, and the transaction is presumed invalid and may be set-aside;
b) The burden of convincing a Court that a set-aside should not occur shifts to the advantaged spouse;
c) This can occur without regard to good or bad intent on the part of the advantaged spouse (i.e., actually intending to defraud as opposed to merely being sloppy). Either way the law declares the transaction to be the result of "constructive fraud".
Once the Court finds constructive fraud the transaction can be set aside. The benefited party can be ordered to pay restitution to the other and to disgorge any profits they alone received, title may be reformed to include both parties' names, or the property may be held in trust for both on a present and go-forward basis rather than in the name of the one alone. If there is an actual fraudulent intent, the remedies to the injured spouse are much more severe. Where a court finds a spouse acted intentionally to defraud the other spouse, the Court "shall" award 100% of the value of what should have been disclosed, or what should not have been transferred, to the innocent spouse! FC section 1101(h).
After Separation, Fiduciary Obligations Continue
The fact that parties have separated or that a dissolution or legal separation is pending does not end the parties' fiduciary responsibilities. Family Code section 1100(e) continues those same duties "until such time as the assets and liabilities have been divided by the parties or by a court."
Remedies for breach of the fiduciary duty as described in Family Code section 721, and 1100, include an amount equal to one-half of the value of any asset undisclosed or transferred in breach of fiduciary duty, plus attorneys fees. This includes inadvertent or unintentional violations. Family Code section 1101(g).
If you have a business, or investments in real estate or simply a family residence, and certain transactions have occurred, you may have a problem. If you are a dependent spouse, regardless whether the other party intended to cheat you, you may have important entitlements and remedies.
This is one of the most complicated, emerging areas of California family law jurisprudence. Do not go it alone! In every single dissolution and legal separation case, regardless whether either party has an attorney, each party must exchange a Preliminary Declaration of Disclosure, and unless expressly waived, a Final Declaration of Disclosure. If these documents contain material errors, misinformation, or are incomplete the consequences can be financially devastating to you. These documents sit as land mines for years to come.
Please examine our FAQ's page and our Desert Divorce Blog for more information about interspousal fiduciary duties.
We have written dozens of articles explaining the operation of interspousal fiduciary duties in every dissolution related context!
Also, try our search engine in the upper right corner.
If you have a family law fiduciary duty issue,
Contact Palm Springs divorce lawyers from Arnold & Peterson, LLP today!
Testimonials & Endorsements
-
“Not only is Mr. Peterson’s knowledge of the law beyond measure, he’s able to articulate it so it’s understandable.”
If you are going through a divorce, Arnold & Peterson is in my opinion the best option available. Mr. Peterson and his assistant Jordyn are top notch. Not only is Mr. Peterson’s knowledge of the law beyond measure, he’s able to articulate it so it’s understandable. He was able to navigate my emotions and help my uphill battle to receive proper visitation as a father. Jordyn never hesitated to reach out within the same business day if documents were needed or for any question I had about the process. Thanks to the team, we resolved the divorce healthfully. I couldn’t be more grateful.- Josh Arguijo -
“I needed the best analysis and advice possible. I found Attorney Thurman Arnold III in Palm Springs.”
I am a Veteran and Retired Deputy Sheriff. My divorce involved complicated property distribution and spousal support issues. I spent considerable time looking for the best Counsel I could find before I negotiated with my ex-wife and her Attorney. In fact, my case was in another county, but that didn't matter. I needed the best analysis and advice possible. I found Attorney Thurman Arnold III in Palm Springs. Attorney Arnold is a BAR Certified Family Law Specialist. In my humble opinion the best! His review of my case and how "Moore Marsden" property division applied was invaluable. His guidance saved me $30,000 dollars. Thank you, Thurman!- Jeff Jones -
“Mike is adept at managing expectations and being very fair and measured.”
Needed to modify a settlement and hired Mike Peterson. Mike is very, very knowledgeable and experienced. When you are going through a divorce or child custody issues, it is the most terrifying and stressful experience. Mike is adept at managing expectations and being very fair and measured. I wish I had hired him initially to get it all done straight the first time around. He is very responsive and communicative and understands the client well. Good luck going through this process - have a good guide like Mike without a doubt.- Donika McKelvie -
“I would highly recommend him and the firm”
Micheal Peterson is very knowledgeable of law and can help you make the best decisions for your family. He does is job with integrity. He helps with giving discounts when he can . I would highly recommend him and the firm . Very good staff .- Vincent Hall -
“Very professional, honest, and handled everything without a hiccup.”
Arnold & Peterson are a class act. Very professional, honest, and handled everything without a hiccup. When a year had passed, he and Jordyn contacted me to let me know I still had retainer on the books! I had forgot and they sent me the money anyway! For this I am very grateful and cannot recommend them enough. You won’t go wrong with Thurman Arnold. He is definitely the guy to have on your side.- Matt Feenstra -
“Simply the Best of the Best!!!”
I Highly Recommend Michael C. Peterson at the Law Office of Thurman W. Arnold!!! I hired Michael for my custody case and he is very knowledgeable and took the time to educate me on the process so we can put together a winning strategy. He fought for me and my children in court and successfully won our case. There are no words to describe how grateful and appreciative I am for Michaels service!!! If you are sitting on the fence on which Attorney to hire, do yourself a favor and hire Michael. I would not recommend anyone else!!! Simply the Best of the Best!!!- John and Lukes Tube -
“Mike amazes me by his knowledge of my case, made me feel like I was his only client.”
- Damaris M.I reached out to this law firm 2 years ago when my life was falling apart. My case was assigned to attorney Michael Peterson. I didn't know much about him except few reviews on google but I'm glad I hit the jackpot. Mike amazes me by his knowledge of my case, made me feel like I was his only client. He's very responsive, respectful and and goes above and…
-
“He and Michael Peterson are truly masters of their craft.”
When my clients have family law issues, I routinely refer them to Thurman Arnold. He and Michael Peterson are truly masters of their craft. Family law can be an unwieldy beast, but they handle it with precision and finesse.- Edward Cross
