The Intentional Breach of a Spouse’s Fiduciary Duty

A fiduciary duty is one in which one party owes another the highest duty of care. For example, someone serving as an executor of an estate has a duty to handle its property and finances with the utmost care. An executor cannot misappropriate money or steal property belonging to the estate, or he may be liable for damages.

Similarly, California law places a fiduciary duty on each spouse to act in the best interest of the other spouse. California Family Code § 721 explains that spouses have “a duty of the highest good faith and fair dealing” with each other and that “neither shall take any unfair advantage of the other.” This fiduciary duty includes three core components: (1) allowing access to records of financial transactions; (2) providing accurate and complete information about community property transactions; and (3) treating benefits and profits from certain community property transactions fairly and accounting to the other spouse for them.

In addition, California law provides a duty of full disclosure regarding all community assets. The duty applies during the period of marriage and after the parties separate, until the item is divided by the court or the parties. Indeed, the California laws regarding divorce provide a formal method by which the assets and liabilities of each party are disclosed to the other.

What happens if one spouse does not perform his or her fiduciary duties? The failure to perform these duties is a called a “breach,” and the law sets forth what happens when there is a breach. The consequence that is imposed depends upon the seriousness of the breach and the view of the family court.

Examples of ways that parties may breach their fiduciary duties include hiding assets or transferring assets to try to deprive the other spouse of any interest in them. The law provides several remedies, or consequences, for a breach of spousal fiduciary duties, including the following:

• A court-ordered accounting and determination of rights of ownership;
• The placement of the name of a party on the title of an asset;
• An award of either 50% of an undisclosed or transferred asset or of an amount of money to compensate the injured party for the loss of interest in that asset; and
• Attorney’s fees and court costs.

In particularly egregious cases, the family court can order the breaching party to give the injured party the whole asset or to pay the injured party its full value . When fraud, oppression, or malice have been adequately proven, the court may award punitive damages, designed to punish the breaching party . It is sometimes necessary to hire a forensic accountant to show that a spouse intentionally breached his or her fiduciary duty. A forensic accountant is trained to trace funds and assets, which can help demonstrate that a spouse intended to hide or misappropriate community assets.

Breach of the spousal fiduciary duty is serious wrongdoing. If you are concerned that your spouse may be attempting to hide or minimize assets, you need an aggressive lawyer who will fight on your behalf. The attorneys at the Law Offices of Judy L. Burger have extensive experience in contested divorce and property proceedings. Call today to learn how our attorneys can protect your property interests as you go through this difficult time: (415) 293-8314.