What Is Fiduciary Duty and Why Does It Matter In Divorce?

During a marriage, spouses come to depend and rely on each other in many different ways, including emotionally and financially. Ideally, spouses work together to build their financial future together, planning their lives and those of their children. A divorce or separation can drastically change that dynamic, as the spouses will now have to rely on themselves and will no longer be looking to that other person for support and trust. Even during a divorce or separation, California law still requires the parties to be honest and fair with each other. This is called “fiduciary duty.”

A fiduciary duty means that the parties are both required to maintain good faith and fair dealing with each other, as is set out in California Family Code 721. When handling community property or entering into transactions with each other, the parties must always exercise the highest level of caution and honesty. The obligation to act as a fiduciary also includes when a party is handling his or her spouse’s separate property.

California Family Code 1100 states that the duty also requires that both parties make “full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest.”  The spouses are also obligated to disclose the existence of assets that they believe may be separate property.

The penalties for failing to act according to these duties can be severe. Breaching the duty can at minimum result in a mandatory monetary sanction, which often comes in the form of attorneys fees and costs being assessed against the breaching spouse. If the complaining spouse can show that the breaching spouse destroyed or wasted a marital asset by not exercising the good faith and fair dealing required, then the complaining spouse could be awarded the value of the destroyed asset. If the breaching spouse fails to disclose an asset completely and this is discovered after the divorce is already over and the final order entered, the victim spouse can seek to have that portion of the order set aside and have the judge reexamine the division of those assets.

Divorce and marriage carry with them heavy responsibilities. Call us today at 619-800-0384 to talk about your case and what we can do to help you make sure you are protected.