Community Property and Fiduciary Duties / by Cassandra Hearn

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Division of assets and debts is typically a central issue for most couples in any divorce.  California is what is known as a community property state.  This means that at the conclusion of a divorce, the court will make an equal division of the parties’ marital assets and marital debts.  During the marriage, the couple was in what is known as a fiduciary relationship.  This means that when spouses enter into financial arrangements during their marriage or exercise control over the parties’ assets, it must be done in good faith and with an eye toward fair dealing.  In other words, especially where one spouse exercises a greater amount of control over the parties’ assets, he or she cannot waste those assets or dissipate them in a way that the other spouse does not agree with.  Neither spouse is allowed to take “unfair advantage of the other,” just as the law expects of the relationship between business partners.  These fiduciary duties also extend to mandatory disclosures made at the beginning of every divorce.  In these disclosures, the parties must make a full and complete accounting of assets, whether or not the spouse believes an asset to be separate or marital.

This fiduciary duty lasts during the marriage and during the separation.  This is an essential issue that is most often the central issue.  After the parties separate, it does not mean that either spouse may now spend all of the marital money or sell assets off for an unfairly low price.  This duty of fair dealing extends until the court makes a final division of the parties’ assets at the conclusion of the divorce. 

There could be potentially severe consequences for a breach of fiduciary duty.  If a spouse believes that the other spouse has breached the duty, the spouse can request a variety of penalties.  The least severe usually includes some monetary sanctions for court costs and attorney’s fees for the breaching spouse.  However, if the injured spouse can demonstrate that the breaching spouse failed to disclose an asset or somehow wasted or destroyed it, then the injured spouse could potentially be awarded the entire asset or its value.  In essence, it results in a division of property that is not equal, which is the typical situation in California divorces.

It is important that every divorce litigant be aware of his or her rights and responsibilities with regard to the parties’ marital assets and debts. Call us today at 619-800-0384 for an appointment so we can talk about your case and your duties.