Fiduciary Duties Overview
Do Parties Owe Fiduciary Duties To Each Other In A Divorce?
Fiduciary duties require each party to act with the utmost good faith toward the other in the disclosure of all relevant material facts and information regarding both community and separate property assets and debts. There may be harsh penalties for breaching these duties.
Divorcing parties are required to make full and timely financial disclosures to the other party as required by fiduciary duties owed to one another. Fiduciary duties exist during marriage and until the property has been divided and distributed. Sections 721(b), 1100(e) and 2100(e) of the Family Code set forth the rules and requirements in this area.
Each spouse has these obligations, both during the marriage and until the property is divided and distributed.
It is easier to prove a breach of fiduciary duty than to prove misappropriation because of presumptions.
Each party has the following duties:
- To make full disclosure to the other party of all material facts and information relative to the existence, characterization and value of assets, and the amount of debt in which the marital community has or may have an interest and/or liability, and to make full disclosure relative to separate property assets and debts.
- To provide equal access to all information, records and books that pertain to the value and character of assets in which the marital community has or may have an interest, as well as debts for which the marital community is or may have liability.
- To act with fiduciary responsibility in all transactions regarding the management and control of community property.
Possible breaches of fiduciary duty during the marriage may include:
- Forging a spouse’s signature to invest in speculative stock option trading without consent
- Gifts to a girlfriend, boyfriend or a third party
- Purchases of illegal drugs
- Intentional or grossly negligent mismanagement of community assets
- Illegal gambling
However, not all things that may initially look like a breach of fiduciary duty during the marriage actually are, such as:
- Legal gambling losses
- Failed investments or business endeavors
- Merely negligent management of community assets
- Exorbitant expenditures on personal items