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Divorce and the fiduciary duty of spouses

On Behalf of | Jul 29, 2022 | Uncategorized |

It’s not unusual for a divorce to become contentious. There’s a lot of emotion involved for both spouses and it’s easy to become upset and frustrated with the process and each other. What most couples don’t realize is that the law requires a certain level of conduct from them and it can be a violation of the law if they fail to live up to it.

What is a fiduciary duty?

The idea of fiduciary duty, or a fiduciary relationship, usually comes up in the context of business. It speaks to the high standards with which one must act toward the other person in the relationship, where they cannot act against that person’s interests.

California Family Code Section 721 extends this same level of responsibility to married couples. They are both considered fiduciaries to the each other, imposing a duty of the highest good faith and fair dealing. In financial matters, the law prohibits either spouse from taking unfair advantage of the other.

The duty encompasses divorce

The spousal fiduciary duty does not stop when a couple separates and prepares to divorce. Family Code Section 2102 extends the duty from the date of separation until all of the couple’s property has been appropriately distributed. This is not the same thing as the divorce being final – property distribution can frequently continue beyond the final divorce decree.

This means that during the divorce process, the couple must be forthright about the existence of marital property or the valuation of business interests. They cannot waste marital assets or use marital funds to pay off separate debts. Instead, they must continue to treat all marital finances as though they were managing those finances for the benefit of their spouse, taking their interests into account along the way.