Fiduciary Duty Between Spouses – Family Code 721

Married people in California are not merely partners in life; in financial matters they are treated like business partners with the highest duty of loyalty the law recognizes. California Code Family Code § 721(b) provides that in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships, a duty of the highest good faith and fair dealing, and neither may take unfair advantage of the other.

The duty includes access to records. Each spouse is entitled to accurate and complete information about community assets and debts, and to accounting of transactions involving community property. California Code Family Code § 1100(e) extends the same standard to the management and control of community property throughout the marriage and until the assets are divided.

The remedies are in California Code Family Code § 1101. A spouse harmed by a breach may be awarded half of the asset involved plus attorney fees, and where the breach amounts to fraud, oppression or malice, the court may award the entire asset to the injured spouse. The duty does not end at separation. It continues until the property is divided, which is why hiding income, running up debt, or moving money without disclosure during a divorce is both a disclosure violation and a breach of fiduciary duty.

In practice the fiduciary duty is the reason the disclosure process is taken seriously: the declarations of disclosure are how each spouse complies with it.