Understanding Fiduciary Duty for California Spouses

When you walk down the aisle and say “I do,” you’re not just committing to love and cherish your spouse. You’re also entering into a legal relationship that brings specific responsibilities. 

At the heart of these responsibilities lies the concept of fiduciary duty, a legal obligation that encompasses various aspects of the marital relationship. While these duties extend beyond finances, this blog will primarily focus on the financial aspects, as these are most commonly at issue in legal proceedings and often overlooked until problems arise.

For many California couples, understanding these duties can mean the difference between financial security and unexpected losses. Whether you’re just getting married, already married, or contemplating divorce, knowing how fiduciary duties work can help you protect your financial future.

What Is Fiduciary Duty?

In simple terms, a fiduciary duty means you must act in the best interest of another person when you’re in a position of trust.

In California marriages, each spouse owes this duty to the other. This means you must handle shared finances and community property with honesty, good faith, and fair dealing. This duty primarily applies to community property and transactions involving both spouses. 

Separate property remains under individual control, though certain fiduciary principles still apply when actions regarding separate property might affect community interests.

Related: Community Property in California: What Belongs to Whom?

The 5 Fiduciary Duties That Apply to Married Couples

California Family Code Sections 721 and 1100 establish general fiduciary principles between spouses rather than a specific numbered list of duties. 

From these legal principles, we can identify several key responsibilities that help clarify what these duties mean in practice:

1. Duty of Disclosure

 You must fully disclose all financial information to your spouse, including assets, debts, income, and financial opportunities.

2. Duty of Access

You must provide your spouse access to all financial records and information related to community property.

3. Duty of Accounting

 You must account for any benefits or profits you receive from community property, especially if you acted without your spouse’s knowledge.

4. Duty of Good Faith

 You must act honestly and fairly in all financial dealings that affect your spouse or community property.

5. Duty of Care

You must manage shared assets responsibly, avoiding waste or needless risk.

While not a formal statutory list, understanding these aspects helps clarify what the law requires of spouses in practical terms.

These duties are often called by another name: the duties of loyalty and care. Business professionals may recognize these terms, as they’re similar to the duties business partners owe each other. That’s no coincidence—California law explicitly states that spouses have the same fiduciary duties as business partners.

How These Duties Protect Both Spouses

These duties exist to prevent financial abuse within marriages. They recognize that spouses often divide responsibilities, with one spouse sometimes having more financial knowledge or control than the other. The law aims to protect both parties by ensuring that neither spouse can take advantage of the other.

For example, if one spouse manages the couple’s investments, they cannot secretly divert funds to their separate account or make high-risk investments without their partner’s knowledge. Similarly, a spouse who discovers a lucrative business opportunity can’t pursue it solely for their own benefit if it should rightfully benefit the marriage.

The Legal Framework of Fiduciary Duties

California’s laws on fiduciary duties are specifically spelled out in the Family Code. Understanding these laws can help you know your rights and responsibilities.

Family Code Section 721: The Cornerstone of Marital Fiduciary Obligations

Family Code Section 721 serves as the foundation of fiduciary duties between spouses. It states that spouses owe each other “a duty of the highest good faith and fair dealing” and that “neither shall take any unfair advantage of the other.”

This section also establishes that spouses have the same fiduciary relationship as business partners. This means you must provide your spouse:

• Access to financial records at all times
• True and complete information about community property
• An accounting of benefits received from the community property

Family Code 1101: Remedies for Breach of Fiduciary Duty

This section outlines what happens if a spouse violates their fiduciary duty. Courts can:

• Order an accounting of property
• Determine ownership rights
• Add a spouse’s name to property titles
• Award 50% of undisclosed or wrongfully transferred assets to the other spouse
• Award 100% in cases involving fraud or malice
• Order payment of attorney fees and court costs

When Fiduciary Duties Apply in Your Marriage

Many couples are surprised to learn that fiduciary obligations extend far beyond the active years of marriage. These legal responsibilities follow a timeline that begins at “I do” and often continues well after a marriage has functionally ended. Knowing the specific stages when these duties remain binding can protect your financial interests during life’s transitions.

Fiduciary Duties During Marriage and Cohabitation

From the moment you say “I do,” fiduciary duties come into play. Every financial decision that affects community property falls under these obligations. 

This includes:

• Managing joint bank accounts
• Making investment decisions
• Taking on debt
• Starting or running businesses
• Buying or selling property

These duties apply whether you’ve been married for decades or just got married yesterday.

Fiduciary Duties After Separation and Filing for Divorce

Many people assume that once they separate or file for divorce, they can start making independent financial decisions. This is incorrect. Fiduciary duties remain in full force after separation.

During this time, you must continue to:

• Disclose all financial information
• Provide access to financial records
• Avoid making decisions that harm community property
• Obtain consent for major transactions

Fiduciary Duties During Divorce Proceedings

Throughout the divorce process, fiduciary duties remain critical. In fact, California divorce proceedings include mandatory financial disclosures precisely to enforce these duties.

You must provide:

• Income and expense declarations
• Complete lists of assets and debts
• Supporting documentation for all financial information
• Updates if your financial situation changes

When Duties Finally Terminate

Fiduciary duties don’t end when the divorce decree is signed. They continue until each specific community asset is actually divided or distributed.

For example, if your divorce judgment awards you each 50% of a retirement account, but the actual division takes place months later, fiduciary duties regarding that account continue until the division is complete.

Common Types of Breach of Fiduciary Duty in Marriage

California courts have established important legal precedents regarding fiduciary duties between spouses. One landmark case that significantly shaped how courts handle these matters is In re Marriage of Rossi (2001).

In this case, a wife won $1.3 million in the lottery but hid this windfall from her husband during their divorce. She filed for divorce just 11 days after winning and never disclosed the lottery proceeds. When her husband discovered the truth years later, the court ruled that she had breached her fiduciary duty and awarded 100% of the lottery winnings to her ex-husband.

This case established that courts will impose severe penalties for intentional breaches of fiduciary duty, especially those involving deliberate concealment of assets. It demonstrates that judges have significant discretion in punishing violations and serves as a cautionary tale for anyone considering hiding assets during divorce.

Let us look at the common types of breaches:

Hiding or Understating Assets: A Serious Breach

One of the most common breaches occurs when a spouse conceals assets. This might involve not disclosing bank accounts, hiding cash, undervaluing property or businesses, transferring assets to friends or family members, creating shell companies or trusts to hold assets, or delaying business deals or income until after divorce.

Courts take these violations seriously. If discovered, the consequences vary based on the circumstances and intent. For negligent or unintentional breaches, courts typically order compensation for actual damages. For breaches involving concealment with malice, fraud, or oppression, courts can award up to 100% of the hidden assets to the wronged spouse.

Related: The Penalty for Hiding Assets in Divorce: All Risk, No Reward

Negligent Breach of Fiduciary Duty

A negligent breach occurs without malicious intent but results from a failure to meet the expected standard of care in managing marital finances. It’s not about dishonesty. It’s about falling short of what a reasonable person would do in the same situation.

Examples of negligent breach include forgetting to pay important bills and triggering penalties, failing to keep proper financial records, overlooking tax obligations, or unintentionally mixing separate and community funds (known as comingling). These are honest mistakes, but they still carry consequences.

California law looks at whether the spouse acted with the level of care a reasonably prudent person would have exercised. Even if the misstep wasn’t intentional, the financial harm can be real, and compensation for actual damages may still be required.

Mismanaging Community Funds and Investments

Mismanagement goes a step further. It’s not just about forgetting or overlooking, it involves active choices that show poor financial judgment.

This can include high-risk investments made without proper research, gambling with community funds, overspending on luxury items, or ignoring professional advice when making business decisions. These aren’t just accidents; they’re choices made with access to better options.

Courts won’t penalize a spouse just because an investment didn’t work out. What matters is whether the decision was reasonable at the time. But if a pattern of poor financial choices emerges, especially when sound alternatives were available, that may qualify as mismanagement under California law.

Failing to Disclose Financial Information

You must keep your spouse informed about financial matters affecting community property. Breaches include withholding bank statements, not sharing tax returns, hiding business records, refusing to answer questions about finances, and concealing financial opportunities.

Remember that your duty isn’t just to answer questions when asked—you must proactively provide information.

Selling or Transferring Assets Without Consent

California law has specific consent requirements that vary based on the type of community property and the nature of the transaction. Written consent is required for any transaction involving real property (Family Code Section 1102), giving away community personal property for less than fair value (Section 1100(b)), transactions involving clothing or furnishings used by your spouse or children, and selling a community property business without prior notice.

For selling personal property like vehicles to third parties at fair market value with mutual agreement, verbal agreement is generally sufficient, as is the case with routine financial transactions where both spouses are informed and agree.

Common violations include selling a home without your spouse’s signature, transferring money to hidden accounts, giving valuable items to friends to conceal them, or selling a family vehicle without discussion when it’s your spouse’s primary transportation.

Even when verbal agreement is legally sufficient, documenting consent is always advisable, especially for significant assets. These requirements become more important around separation or divorce, when courts scrutinize transactions more carefully.

Taking on Excessive Debt Without Consultation

Debt acquired during marriage is typically community debt, meaning both spouses are responsible. Breaches include opening credit cards without your spouse’s knowledge, taking out loans your family cannot afford, borrowing against community assets, co-signing loans for others without disclosure, and running up debt prior to separation.

Courts can assign certain debts solely to the spouse who incurred them if they violated fiduciary duties in the process.

Real Estate Fiduciary Duty: Violations in Property Transactions

Real estate often represents a couple’s largest asset, making fiduciary duties particularly important in this area. Violations include selling property without consent, refinancing without disclosure, allowing foreclosure through neglect, transferring title to exclude a spouse, and using joint property as collateral for personal loans.

California requires written consent from both spouses for transactions involving the family home, making violations particularly clear.

Modern Considerations: Cryptocurrency and Digital Assets

Today’s financial landscape includes digital assets that can be easily hidden or transferred. Common breaches involving digital assets include failing to disclose cryptocurrency holdings, hiding income from online businesses, failing to report stock options or equity compensation, concealing intellectual property rights, and not disclosing online financial accounts.

Courts are becoming increasingly savvy about digital assets, and forensic experts can often trace these transactions even when a spouse thinks they’re hidden.

Related: Property Division and Bitcoin: How the Court Handles Digital Money 

The Presumption of Undue Influence in Marital Transactions

California law creates a special protection known as the “presumption of undue influence” when transactions between spouses result in one spouse gaining an advantage over the other. 

In practical terms, if one spouse obtains a significantly better deal in a transaction between them, the law automatically assumes they may have misused their position of trust. The burden then shifts to the advantaged spouse to prove:

• The transaction was fully explained
• Their spouse entered into it voluntarily with complete knowledge
• The terms were fair and reasonable
• No pressure or manipulation was used

This presumption applies to property transfers, business deals between spouses, and marital agreements. It’s an important protection, especially for spouses with less financial knowledge or who typically defer to their partner on financial matters.

For example, if a wife sells her separate property, let’s say a car, to her husband for more than it’s worth, the law would presume she used her position of trust to influence him to pay too much. She would need to prove the transaction was fair and that she fully disclosed all relevant information about the car’s value.

California Statute of Limitations for Breach of Fiduciary Duty

If you believe your spouse has breached their fiduciary duty, you must act within certain time limits to protect your rights.

Breach of Fiduciary Duty Statute of Limitations

Under California law, the general statute of limitations for breach of fiduciary duty claims is three years from when you discovered (or should have discovered) the breach.

This three-year period begins when you had “actual knowledge” of the transaction or event constituting the breach, not when you merely had suspicions.

Time Constraints for Filing Claims

The statute of limitations applies differently depending on when you file your claim. During divorce proceedings, breaches can typically be addressed as part of the divorce case. After the divorce is final, you must file within three years of discovering the breach. Without filing for divorce, you can file a separate action for breach of fiduciary duty.

Keep in mind that delay can hurt your case, even if you’re within the statutory period. Courts prefer breaches to be addressed promptly.

Exceptions to Standard Limitations Periods

The three-year time limit has several important exceptions that you should be aware of. If you include your breach of fiduciary duty claim as part of a divorce, legal separation, or marriage annulment case, the normal three-year deadline doesn’t apply. This means you can address old financial misconduct even if it happened many years ago, as long as you raise it during your divorce proceedings.

Similarly, if you discover a breach after your spouse has died, you can still pursue a claim regardless of when it happened.

Another helpful exception is the “discovery rule.” This means the three-year clock only starts when you actually become aware of the breach, not when it occurred. If your spouse actively hid financial misconduct, the court may give you additional time to file your claim.

These exceptions exist because financial wrongdoing is often deliberately hidden, making it hard to discover right away.

Financial Trust in Marriage: Key Takeaways

Fiduciary duty forms the foundation of financial trust in California marriages. Understanding these responsibilities helps you protect your interests while fulfilling your legal obligations to your spouse.

From the start of your marriage through separation and divorce, these duties require honesty, transparency, and fair dealing in all financial matters. Whether you’re managing routine household finances or complex investments, the principles remain the same: act in good faith, provide full disclosure, and avoid taking advantage of your spouse.

For those with substantial or complex assets, the stakes are particularly high. Business interests, real estate holdings, and international investments create additional layers of responsibility. 

If you have questions about your fiduciary duties or believe your spouse may have violated theirs, professional guidance can help. Our team understands the nuances of California family law and can help you navigate these waters successfully.

For personalized advice about your situation, call us at 310-820-3500 to schedule a case evaluation.

Disclaimer: This blog is for general informational purposes only and does not constitute legal advice or create an attorney-client relationship. Every family law case is unique, and outcomes depend on individual circumstances. Legal representation with Provinziano & Associates is established only through a signed agreement. For personalized advice, please contact our team at 310-820-3500 to schedule a case evaluation.