Marriage entails both ethical and legal responsibilities and duties between spouses. In California, the law requires a married person to act most honestly and fairly towards his or her spouse. The Family Code specifically provides that, “[t]his confidential relationship [of marriage] imposes the duty of the highest good faith and fair dealing on each spouse, and neither shall take unfair advantage of the other.”
Thus, whether or not married people in California know it, the foregoing means a married person owes a Spousal Fiduciary Duty to his or her spouse. This duty applies to each spouse’s conduct during their marriage, in the event of their divorce, and, also can have a bearing on spousal behavior in the context of their estate planning. Let us discuss.
Generally speaking, California law gives either spouse acting alone complete power over the couple’s Community Property subject to the foregoing Spousal Fiduciary Duty of the “highest good faith and fair dealings”. With certain important exceptions, either spouse can control and sell the couple’s Community Property assets. Each spouse’s own Separate Property, however, remains controlled by that spouse alone.
Thus, when one spouse is incapacitated the other well spouse acting alone can manage the couple’s Community Property assets. But the well spouse still requires authority under the incapacitated spouse’s Power of Attorney or Trust, as relevant, to manage the incapacitated spouse’s own Separate Property.
In the absence of adequate estate planning on the part of the incapacitated spouse, the well spouse may need to petition the court for a conservatorship over the incapacitated spouse’s estate in order to manage Separate Property assets.
The Spousal Fiduciary Duty also requires each spouse to make full disclosure to the other spouse of all material information related to the existence and character of assets in which the Community Property estate has an interest.
Remedies exist where one spouse transfers assets without the other spouse’s consent in violation of the Spousal Fiduciary Duty and/or fails to disclose Community Property assets. The court can, “award to the other spouse … 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs.”
In estate planning, the Fiduciary Duty prohibits a married person from using Undue Influence to coerce their spouse. That is, for example, one spouse may not coerce the other to transmute (change) his or her own Separate Property into the couples’ Community Property (which has the effect of gifting half the value of the asset to the other spouse).
Nor may one spouse coerce another spouse into executing an estate plan (such as a Trust or a Will) that does not truly reflect the spouse’s own true estate planning wishes; for example, coercing one’s spouse into disinheriting their own children in favor of the other spouse and his or her own children).
Oftentimes when the Spousal Fiduciary Duty applies it overlaps with other applicable laws that prohibit that type of wrongful behavior regardless of marriage. For example, laws that prohibit Elder Abuse and Undue Influence are further supported by the Spousal Fiduciary Duty when married people are involved.
That married people owe one another a Spousal Fiduciary Duty is appropriate: Spouses must rely and trust one another throughout marriage. The Spousal Fiduciary Duty protects such trust and reliance as sacrosanct in the eyes of the law.