What You Need to Know About Fiduciary Duties of Spouses
California Family Code Section 721 helps us understand the fiduciary duties spouses owe to each other. Here’s everything you need to know about Fiduciary Duties of Spouses: California Family Code Section 721.
California Family Code Section 721 requires spouses to act in good faith toward each other in all legal transactions. Section 721 further adds that the spouses must work in good faith and not take advantage of the other in a transaction.
Important Terms to Understand
Fiduciary
Fiduciary refers to a person or company that has the power and obligation to act for another under circumstances that require total trust, good faith, and honesty. This includes anyone who undertakes to assist someone who places complete confidence and trust in that person or company.
Fiduciary Duty
When someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially. Fiduciary duties apply to parties both prior to and after separation, although in different ways. For purposes of determining the respective interests of the parties in the family home, the application of fiduciary duties relates to transactions during a marriage.
Good Faith
Good faith is usually used to describe honest dealing. Although the term varies by circumstance; it may require an honest belief or purpose, faithful performance of duties, observance of fair dealing standards, or an absence of fraudulent intent.
Confidential Relation
Confidential relation is a relationship of intimacy and trust, especially one in which one person is in a position of greater knowledge or power.
Community Property
Community property means that marriage makes two people, one legal “community.” So, the property acquired by a couple during marriage is considered “community property.” Community property is generally everything that spouses own together.
Related: Community Property Laws in California
Understanding Family Code Section 721
Family Code Section 721 holds that each spouse must act with respect to the other spouse in managing and controlling their community property in accordance with the general rules governing fiduciary relationships that control the actions of people who have confidential relations with each other. Spouses have a confidential relationship, as well as a fiduciary relationship with each other. This means that each spouse must place trust and confidence in the integrity, honesty, and fairness of the other.
In transactions with each other, spouses have a duty to act with the highest good faith and fair dealing. In addition, neither spouse may take any unfair advantage of the other. The Code further holds that the fiduciary relationship between spouses is subject to the same rights and duties as those applicable to nonmarital business partners. These include, but are not limited to:
- Always providing each spouse access to any books kept regarding a transaction, with the purpose of inspecting and copying the books,
- Rendering, on request, true and full information of all things affecting any transaction that concerns the community property. Although, neither of the spouses is required to keep detailed books and records of the community property transactions, and
- Accounting to the other spouse includes any benefit or profit from any transaction whereby one spouse acted alone and without the consent of the other.
As each spouse has the right to equal management and control of community property, each spouse has the duty to provide the other spouse, without demand, any information concerning the management and control of such property. If one spouse fails to do so it would be considered a breach of fiduciary duty.
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