The Fiduciary Duties Between Spouses and Domestic Partners

A lot of people don't realize that when they say "I do", they are not just agreeing to love, honor, and cherish their new husbands, wives, or domestic partners. Under California Family Law, when a couple says "I do" and enters into a marriage or domestic partnership, they are essentially entering into a financial relationship with some very serious legal obligations. This relationship and these obligations start at the very outset of or the marriage or domestic partnership, and does not end until the death of either party, or, in the event of divorce or legal separation, until the marital assets are divided.

California Family Code – "Fiduciary Relationships"

This financial relationship between spouses and partners is referred to as a fiduciary relationship in the California Family Code. Family Code Section 721 defines this fiduciary relationship between spouses as a confidential relationship in which each spouse will treat each other with the utmost good faith and fair dealing, and neither spouse will take unfair advantage of the other. Section 721 further defines the relationship between spouses as identical to the relationship between business partners, and states that various sections of the California Corporations Code apply to marriages as well as business partnerships. So, for example, a wife with a 401(k) is required to allow her husband to review the account statements concerning her 401(k) upon the request of the husband. And vica versa, if the husband has a stock portfolio, he is required to allow his wife to review the account statements of his stock portfolio upon her request.

The fiduciary relationship requires more than that however. Transactions between spouses or domestic partners must be fair. So, should one spouse transfer his or her separate property to the other spouse for nothing in return, pursuant to Family Code Section 721, there will be a presumption that the spouse that received that property exerted undue influence over the spouse who gave away his/her property. A common scenario where this occurs is when one spouse owns a home from prior to marriage, but during the marriage, he/she puts the other spouse's name on title. Essentially, in so doing that spouse is giving away half the equity in his/her home.

The presumption of undue influence can be overcome by a preponderance of evidence. In the example above, the spouse whose name was put on title to the home can argue that that was done so the parties could refinance the home, and perhaps get a better interest rate on the mortgage. That occurs quite frequently.

However, there are times when the presumption of undue influence is not rebutted. In such an event, the family law judge can make findings that there was a breach of fiduciary duty, and the transaction is to be reversed, and/or the spouse who was unduly influenced is to be compensated in some manner for the loss of his or her property. In such an event, the family law judge can also financially penalize the spouse who unduly influenced the other spouse.

Know Your Financial Obligations in a Marriage or Domestic Partnership

A lot of couples who enter into marriage or domestic partnerships are simply unaware of these rules. Then, when they separate, they're surprised that they have to produce what seems to be a ton of financial records for what they thought might be or should be an easy divorce. Sometimes, these problems can be avoided or lessened by the couple entering into a prenuptial agreement prior to marriage. Of course, if people don't know of these issues prior to marriage, they may not consider the idea of having a prenuptial agreement drafted.

Contact a Roseville Family Law Attorney

For more information on spouses' fiduciary duties to each other, division of community property, and prenuptial agreements, please contact the Law Office of Evan Samuelson.