When Does Breach of Fiduciary Duty Apply?

Many California spouses are unaware of their fiduciary legal obligations during the marriage. These duties are the same that apply to business partners. Fiduciary duty in marriage includes the obligation to act in good faith, avoid taking advantage of the other, and other fair and ethical obligations. What this means is that you should treat your spouse and your community assets with respect, and your actions should always be taken with your spouse in mind.

In marriage and separation, spouses must follow this duty. When a spouse breaches their fiduciary duty, they can be held legally accountable.

How Long Does Fiduciary Duty Apply?

Fiduciary duty to your spouse starts once you’re married. If you and your spouse decide to separate or divorce, your fiduciary duties continue until all assets are distributed under California’s community property law or through a marital agreement.

Some people falsely believe that fiduciary duty ends as soon as a divorce is finalized. However, spouses actually owe each other fiduciary duty until both spouses have control over their separated assets.

What is Covered by Fiduciary Duty?

Good faith and moral obligations apply to all property that both spouses own, including separate and community property. Marital fiduciary duties include:

Readily providing information regarding community assets and debts
Maintaining records about community property
Avoiding mismanagement of community property, intentional or accidental
Providing transparency regarding any decision that impacts community property, like any transactions
Avoiding prioritizing your property over community property, or your spouse’s property

Divorce and separation fiduciary duties include:

Reporting any changes to income or employment
Communicating anything that may impact community assets or debts, including lawsuits and tax issues that are involved
Informing of any offers to purchase community investments or business
Reporting retirement or investment opportunities

Though many separating couples handle the division of property in good faith, some spouses will hide assets or commit fiduciary breaches to get more than their share of the equal community property split.

What Counts As Breach of Fiduciary Duty

Examples of ways spouses can fail to uphold fiduciary duty include:

Selling or giving away community assets without their spouse’s permission
Frivolously spending or mismanaging community assets
Hiding community property
Providing inaccurate valuations of assets
Paying separate debts with community assets
Mislabeling or fraudulently transferring community assets as separate
Taking financial advantage of their spouse during transactions

These breaches are generally done purposefully, but they are often still a breach of duty if they are done accidentally.

What Happens When Breach of Fiduciary Duty Is Discovered

If you believe your spouse or ex-spouse is hiding assets or otherwise breaching their fiduciary duty, you have legal options. There are severe repercussions for spouses who reach this duty, as trust in a marriage means that it is the highest level of fiduciary duty. Depending on your situation, the court may:

Order a monetary sanction
Order accounting of the property
Determine the character of a property as separate, community, or quasi-community
Modify the character of a property
Require your spouse to cover attorney fees and costs
Order your name added to an asset or your name to be the sole holder of an asset.
Award you half the asset that has been hidden, transferred, or inaccurately valued.
Award you up to the entirety of the asset in cases of malice, fraud, or cases of oppression that subjects you to unjust hardship.

Breaches of fiduciary duty may be only one instance or may include a series of transactions.

Statute of Limitations on Breach of Fiduciary Duties

You must petition within four years of the day you knew of the breach under California’s code of civil procedure if you discover a breach of fiduciary duty. If your claim falls under constructive fraud, it must be filed within three years. If you file after this time, your claim is likely to be dismissed. The sooner you file a claim once you discover the breach, the better.

FAQs

Q: What Is Fiduciary Duty During a Divorce?

A: Fiduciary duty to your spouse means that you act in their better interests in regard to community property and financial matters. During a divorce, this means that you disclose all assets and debts and inform your spouse of any changes to assets, your income, or your employment. You should also keep them aware of offers for assets or tax issues that may arise.

Q: What are the essential elements of a breach of fiduciary duty claim?

A: The elements for any fiduciary claim are:

The accused person must be responsible for fiduciary duty to the other
There was a breach of this duty
The person bringing this claim forward suffered damaged
The accused person caused these damages

Fiduciary duty is part of a marriage and applies throughout a divorce, so what can be difficult to prove is the following three elements.

Q: What Happens When a Partner Breaches Their Fiduciary Duty?

A: The person harmed by the breach of fiduciary duty can file a claim against their spouse. Their spouse may be liable for damages. The court may determine that the spouse is liable for attorney’s fees and costs or place a sanction on their finances. The court may also choose to give half of a contested asset or property to the spouse who was harmed. If the breach of duty is determined to be malicious or fraudulent, the court may be awarded up to 100% of the contested asset or property.

Q: How Hard Is It To Prove a Breach of Fiduciary Duty?

A: Some aspects of the claim are easier to prove, as you do not have to prove that the intent was fraudulent, only that duty was breached. However, for other aspects, it can be difficult to prove a breach of fiduciary duty because evidence may often be hidden. This evidence is much easier to find with the assistance of a qualified attorney.

Bickford Blado & Botros: Your Breach of Fiduciary Duties Attorneys

Divorces are already emotionally and financially difficult. Dealing with a spouse who is failing to act in good faith makes it even harder. If you believe that your spouse is hiding assets or mismanaging property, you should contact our experienced attorneys. At Bickford Blado & Botros, we have years of experience and the necessary financial background and resources to help you through this complex process.

Feel Free to Contact Our Office with Any Questions

858-793-8884