In California, breach of fiduciary duty in a marriage refers to a situation where one spouse violates the legal obligation to act in the best interests of the other spouse with respect to financial matters and property. The law considers spouses to have a fiduciary duty to each other, which means they must act with honesty, good faith, and fairness in managing marital assets and dealing with finances.
This fiduciary duty arises under California’s Family Code and applies to both the management and the division of community property, which includes assets and debts acquired during the marriage. Here’s what you need to know about breach of fiduciary duty in the context of marriage in California:
1. Fiduciary Duty Between Spouses
- Under California Family Code §721, spouses owe each other a fiduciary duty of good faith and fair dealing. This duty requires spouses to act in the best interests of each other and to be honest and transparent about financial matters.
- The fiduciary duty includes an obligation to disclose all material facts related to the assets, debts, and financial circumstances during the marriage. This is especially important during divorce proceedings, where accurate financial disclosure is necessary for the fair division of property.
2. Common Examples of Breach of Fiduciary Duty
- Concealing Assets: One spouse hiding or failing to disclose assets (such as income, bank accounts, or real property) during divorce proceedings.
- Fraudulent Transfers: A spouse transferring assets to third parties or otherwise hiding assets to avoid dividing them in a divorce.
- Misuse of Community Funds: One spouse using community property or funds for personal purposes without the consent or knowledge of the other spouse, such as withdrawing large amounts of money for non-essential purposes.
- Failure to Provide Financial Information: One spouse deliberately withholding important financial details, such as income, debts, or business valuations, to gain an unfair advantage during property division.
3. Consequences of Breaching Fiduciary Duty
- If one spouse breaches their fiduciary duty, the other spouse may request a penalty under California law.
- Family Code §1101 allows the non-breaching spouse to seek a monetary sanction. The court can award up to one-half of the value of any asset that was wrongfully concealed, transferred, or misappropriated.
- In some cases, the court may award attorney’s fees and costs to the spouse who was harmed by the breach.
- Additionally, the court may set aside a divorce settlement or judgment if it is found that one spouse withheld or misrepresented financial information, which could result in an unfair division of property.
4. How to Prove a Breach of Fiduciary Duty
- Evidence: To prove a breach of fiduciary duty, the non-breaching spouse must provide evidence of the other spouse’s misconduct. This could include:
- Financial records showing discrepancies or hidden assets.
- Testimony or documentation demonstrating that one spouse intentionally withheld or misrepresented financial information.
- Evidence of fraudulent transactions or attempts to hide property.
- Discovery Process: During divorce proceedings, the discovery process can help uncover evidence of a breach of fiduciary duty. This includes requests for financial documents, depositions, and subpoenas.
5. Legal Remedies and Actions
- Request for a Special Master: In cases of significant financial concealment or fraud, the court may appoint a special master or forensic accountant to investigate the financial matters of the case.
- Request to Set Aside a Judgment: If a divorce judgment is finalized but evidence of a fiduciary breach comes to light afterward, the non-breaching spouse may petition the court to set aside the judgment and reopen the case to ensure a fair division of property.
6. Statute of Limitations
- There is a statute of limitations on filing claims related to a breach of fiduciary duty. In general, the time to bring a claim in California for breach of fiduciary duty related to the division of property is three years from the date the wronged spouse discovered or should have discovered the breach (California Code of Civil Procedure § 338).
- If the breach is discovered after a divorce judgment is final, the statute of limitations starts from the date the breach is discovered, not from the date of the divorce.
Conclusion
A breach of fiduciary duty in a California marriage occurs when one spouse violates the legal duty to act honestly and transparently with respect to financial matters. If one spouse hides assets, makes fraudulent transfers, or fails to disclose material financial information, the other spouse can seek penalties, including a fairer division of property or a monetary award. If you believe your spouse has breached their fiduciary duty, it is important to consult with a family law attorney to understand your rights and the best course of action to protect your interests.