Saying "I do" to fiduciary responsibility.

• Author: Bartholomew, Hal
• Position: FiduciaryDuties

If you are advising a spouse who is the decision maker--be careful. Generally, a husband and wife owe one another duties of mutual respect, fidelity and support. Failing to advise happily married clients about the fiduciary duty between spouses could result in penalties to one spouse and even future windfalls to the other spouse due to lack of disclosure.

How can your client get in trouble? Suppose your client uses his separate property rather than community property to make an investment that goes up in value. Questions that arise include: Why didn't he use the community? And why didn't he allow the community to benefit from the investment?

Or, suppose your client--and the community--own stock in a company. Your client sells his stock, which then goes down in value, but not the community's. Why did he allow the community to suffer from the decrease in value, but sell his stock?

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Any transaction between a husband and wife arises in the context of a confidential relationship imposing a duty of the highest good faith and fair dealing on each spouse, with neither side taking unfair advantage of the other.

The standard of care stems from California's public policy that marriage is an equal partnership and that spouses owe each other the same highest duties owed by parties to a fiduciary relationship.

FAMILIAL DUTIES

In 2003, the California Legislature redefined the fiduciary relationship between spouses to include all of the duties owed by nonmarital business partners in Family Code Sec. 721(b). This confidential fiduciary relationship includes, but is not limited to:

* Providing access at all times to any books regarding a transaction for the purpose of inspection and copying;

* Providing, upon request, full and true information about any transactions concerning community property; and

* Accounting to, and holding as a trustee for, the other spouse any benefit or profit derived from any transactions concerning community property that occurred without the other spouse's consent.

When a transaction between husband and wife is advantageous to only one spouse, the law presumes the transaction to have been induced by undue influence. The "advantaged" spouse would need to show that the transaction was freely and voluntarily consented to, with full knowledge (of the other spouse) of all the facts and a full understanding of the effect of the transfer.

MANAGEMENT AND CONTROL

A spouse who is primarily managing and controlling a...