Fiduciary Duties of Spouses (& domestic partners)
In California law, marriages (& registered domestic partnerships) include an implicit promise by each party of mutual respect, fidelity & support. Spouses may not take an unfair advantage. Rather, spouses & partners owe each other high fiduciary duties, including a duty of the highest good faith & fair dealing.
- Marital fiduciary duties apply during marriage including separation until the divorce is final including final distribution of assets. Family Code § 2102.
- These spousal duties may be altered by contract. Probate Code §§ 141 – 146, 16040, 16047.
- Actions that violate fiduciary duties of marriage include hiding assets or unilaterally transferring community assets to one’s advantage. A strong presumption of undue influence exists if a spouse unduly benefits in a transaction. Family Code §§ 720, 721.
The two main types of marital property in California are Community & Separate Property.
- Spouses own Community Property equally.
- Property acquired during marriage is generally Community Property, except for property acquired by gift or inheritance. Cal. Family Code §§ 760, 770, 2550 & Probate Code § 28, 100.
- Quasi-Community Property is property that is acquired by either spouse while living outside of California, if it would be Community Property under California law, had the spouse lived in California at that time. During divorce or at death, it is treated like Community Property. Family Code §§ 125, 2502 & Probate Code §§ 66, 100, 101.
- Separate property includes property acquired:
- before marriage,
- after formal separation,
- by gift or inheritance, or
- by using separate property assets. If separate property assets generate the income, the income remains separate. However, this separate character of the property may easily be lost through intermingling.
- Family Code §§ 770, 771, 781.
Default Distribution of Marital Property in Divorce
- With some important exceptions, particularly survivorship, when one spouse dies during divorce, half of the community estate belongs to the surviving spouse & half belongs to the decedent’s estate. Probate Code §§ 100, 101.
- Community Property may be held with a right of survivorship. Family Code § 750. For example, with a joint bank account, at the death of one spouse, the entire account vests with the survivor. For this exception to apply, title to the property must expressly state that it is joint property or community property with the right of survivorship. Civil Code § 682.1.
- A decedent spouse’s property that was separate during marriage generally remains part of their estate.
- In addition, the decedent may distribute their share of Community Property via a will or trust. Probate Code § 104, 6101, Family Code § 770.
- If one spouse dies intestate (that is, without a valid will), the surviving spouse will be entitled to a share of decedent’s separate property in intestacy, unless there is some document or designation of an alternative distribution of property such as a trust, beneficiary designation, or other agreement. Probate Code § 6401.
Default Distribution of Marital Property at Death
- With some important exceptions, particuarly survivorship, when one spouse dies during divorce, half of the community estate belongs to the surviving spouse & half belongs to the decedent’s Estate. Probate Code §§ 100, 101.
- Community Property may be held with a right of survivorship. Family Code § 750. An example is a joint bank account. Such property, at the death of one spouse, then fully vests with the survivor. Title to the property must expressly state that it is joint property or community property with the right of survivorship. Civil Code § 682.1.
- Separate property of a who dies during marriage generally remains part of their Estate. The decedent may distribute their share of Community Property via a will or trust. Probate Code § 104, 6101, Family Code § 770.
- If one spouse dies intestate (that is, without a valid will), the surviving spouse will be entitled to a share of decedent’s separate property in intestacy, unless there is some document or designation of an alternative distribution of property (such as a trust, beneficiary designation, or other agreement. Probate Code § 6401.
Automatic Temporary Restraining Orders during divorce
Mutual Automatic Temporary Restraining Orders prohibit various actions. Violating the court’s orders or the Automatic Temporary Restraining Orders is punishable by fine or jail. Forbidden actions under ATROs include
- taking certain actions regarding minor children without the other party’s written consent or a court order, including removing minor children from the state or applying for passports for children;
- disposing, transferring, or encumbering property without the other party’s prior written consent or a court order;
- taking actions with respect to insurance policies, borrowing against or cancelling policies or changing the beneficiaries; &
- making non-probate transfers affecting property without the written consent of the other party or order of the court.
Despite the Automatic Temporary Restraining Orders, spouses may
- use assets in the usual course of business or for the necessities of life (with five business days notice before any proposed extraordinary expenses and with a duty to account to the court for such expenditures);
- pay reasonable attorneys fees
- make, modify, or revoke a will
- eliminate a survivorship right, for example, severing a joint tenancy (with notice)
- Revoke a non-probate transfer, like a trust or payable on death account account (with notice)
- create an unfunded trust.
Per Family Code section 233(a), the ATROs remain in effect until either:
- the court enters a final judgment in the divorce
- the petition is dismissed, or
- the court otherwise orders.
The court possesses broad powers over the parties during divorce, including the ability to modify or dissolve the Automatic TROs. This includes the power to make a final judgment which includes continuing protective orders to which the spouses must comply. Family Code §§ 235, 2045, 2049, 6360.
California statutes provide the default rules for characterizing property as community or separate, but spouses can deviate from the default rules through estate planning or marital property agreements. The rules discussed apply to property in a marriage or a registered domestic partnership.
California recognizes valid marital agreements entered both before and during the marriage between spouses about property distribution after divorce or death. However, there are special rules concerning such agreements, and without unusual care in their execution & in preserving the nature of separate property assets, they may prove difficult to enforce. Family Code §§ 721, 1500, 1600 – 1617.
Pursuant to Family Code section 2040, upon service of a summons in a divorce, automatic temporary restraining orders (ATROs) are created which apply to both parties, which prevent either party from taking actions affecting the ownership interests of property & requiring that they preserve the status quo during the divorce until property is distributed by they court.