On the playground, our relationships with one another are guided by the Golden Rule: Do unto others as you would have them do unto you. This is where we learned to take turns with the jump rope, to push each other on the swings, and to jump off the slide when we reached the bottom to make room for the next kid.
In a marriage in California, however, we are held to an even higher standard than that of the Golden Rule: that of a fiduciary. Being a fiduciary to your spouse brings with it a moral, ethical, and legal obligation to act in good faith, to ensure fair dealing, and to avoid taking unfair advantage of the other. It is a heavy responsibility that impacts all elements of the relationship: the documents you keep, the information you share, and the choices you make.
In most cases, a rule like fiduciary duty only takes center stage when it has been broken. So what does a breach of fiduciary duty mean under California Family Law? Let’s take a closer look at when this duty applies, what it covers, and the penalties that exist under California law to hold spouses accountable to one another—both during the marriage and while separated.
When Does Fiduciary Duty Apply
Your fiduciary duty begins the moment you marry and lasts longer than you may think. Indeed, in the event of a separation leading to a divorce, your fiduciary duty extends until the time all assets have been distributed or divided. For some people getting a divorce, this final distribution or division of assets will accompany the divorce agreement itself.
However, when a divorce is particularly complicated or contested, a divorce may be awarded before all assets and debts have been divided. In those cases, the fiduciary duty applies until each spouse has complete control over the assets and debts that are theirs.
What Does Fiduciary Duty Cover?
The duty of good faith and fair dealing applies not only to community property (e.g., the assets and debts acquired during the marriage) but also to your spouse’s separate property. For example, if you manage an investment account that your spouse had before the marriage, you are required to act in your spouse’s best interest in every decision you make.
Fiduciary duty is broad and not always obvious. Under the fiduciary duty of a marriage in California, you must:
- Share information about community property assets and debts. This includes maintaining good records and sharing information readily.
- Be transparent in decisions affecting community property. This includes big ticket items like real property transactions and investment decisions and smaller choices like selling household items your spouse uses.
- Avoid mismanaging community property. This includes engaging in deals that are adverse to the community, whether intentional or accidental.
- Avoid competing with your spouse or the community. In other words, as a fiduciary, you cannot prioritize your separate property assets above those of the community or your spouse.
In the event of a divorce, the fiduciary duty continues until all property has been divided. Responsibilities after the date of separation also include a duty to report:
- Any adjustment in your employment status and income. For example, a promotion or pay raise, a bonus, or getting laid off.
- Changes impacting the community’s real property assets and debts. For example, changes to the mortgage or tax liability.
- Offers to purchase the community’s business or other investments.
- Lawsuits impacting the community’s real property assets, debts, or businesses.
- Tax issues involving the community’s real property assets, debts, or businesses.
- Opportunities related to retirement or investment plans. For example, eligibility to exercise stock options.
With all these responsibilities, it is not hard to see why fiduciary duty is such an important and complicated question. In a perfect world, both parties disclose all assets and debts and divide the property quickly and fairly. However, in the real world, sometimes one party discovers the other has omitted assets or committed other breaches of their fiduciary duty.
Consequences of a Breach of Fiduciary Duty Under California Family Law
If you think your ex-spouse has breached their fiduciary duty, you have several avenues available to you under California Family Law. It is never a hard and fast rule, but typically, the court can award any of the following:
- Sanctions (monetary penalty for bad behavior)
- Attorneys fees and costs
- Your half of the asset; or, in the event of malice, oppression, or fraud, up to 100% of the asset.
Unfortunately, proving a breach of fiduciary duty can often prove to be a challenge, especially when records and documentation is accidentally or willfully hidden.
If you think your ex-spouse may not be acting in good faith toward you, your separate property assets under their control, or the community, be sure to discuss your options with an experienced divorce attorney. Whether you are considering a separation or paperwork has already been filed, this may be a valuable conversation to understand both your responsibility and your rights.
At Van Voorhis & Sosna, we know the complexities of divorce in the Bay Area because family law is our sole focus. We offer legal advice and representation based on integrity, trust, and understanding. Contact us today, or call 415.274.2530 to schedule a free legal consultation.
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