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Posts

Understanding the Spousal Fiduciary Duty

September 9, 2016/in Family Law /by Gretchen Boger

Marriage prompts a lot of change—last names, bank accounts, estate plans, housing—but one of the most important changes that arrives once you say “I do” is a fiduciary duty to your new spouse. Fiduciary duty may sound like a term reserved for the boardroom, but a broad fiduciary relationship exists between married spouses as well.

At the most basic level and as prescribed by California Family Code § 721, spouses possess a duty of “the highest good faith and fair dealing,” and “neither spouse shall take any unfair advantage of the other.”  Further, the spousal fiduciary duty includes “the same rights and duties of nonmarital business partners” as outlined in the California Corporations Code.  Although the Corporations Code uses business-centric language, the Family Code incorporates partner-based duties and applies them to spouses.  Thus, spousal fiduciary duties include:  1) allowing access to transaction books, 2) providing full and true information about any community property, and 3) an accounting of any benefit derived from any community property transaction by one spouse without consent of the other spouse.  Additionally, spouses owe each other a duty of loyalty—spouses must refrain from dealing with each other as an adverse interest and must refrain from competing with each other—and a duty of care.

Returning to the Family Code, Section 1100 details the fiduciary duties that accompany the control and management of community property.  Of note is subsection (b): “a spouse may not make a gift of community personal property for less than fair and reasonable valuable, without the written consent of the other spouse.”  In other words, even when giving a community fund-purchased gift to his/her children, a spouse needs the written consent of the non-purchasing spouse.  Typically, a nonconsenting spouse is unlikely to challenge holiday and birthday gifts given to his/her own children, but that spouse does have the legal ability to void the gift and receive compensation for its value—an issue usually raised during a separation or divorce proceeding.

Importantly, even after spouses separate or file for divorce, they still owe a fiduciary duty to one another—until all assets and liabilities have been officially divided, spouses must act with respect to each other and fully disclose all material facts and information regarding community property or debts.

Ultimately, most spouses don’t actually keep (or legally, even have to keep) detailed transaction books in the manner expected of business partners, nor do most spouses actually ask for formal consent before making routine purchases, but it is important to note that unilateral transactions could be used as ammunition in a separation or divorce proceeding.  Therefore, if you are pondering a large purchase or gift, it is wise to document the process, seek the written consent of your spouse, and/or use your own separate property to make the purchase.

If you would like more information about the fiduciary duty you owe to your spouse, please contact the experienced family law attorneys at Lonich Patton Ehrlich Policastri.  From pre-nuptial agreements to divorce proceedings, we can help you understand how the spousal fiduciary duty plays a role in your marriage.

Lastly, please remember that each individual situation is unique, and results discussed in this post are not a guarantee of future results.  While this post may detail general legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

Sources:

California Family Code § 721

California Family Code § 1100

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Gretchen Boger https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Gretchen Boger2016-09-09 14:23:032021-12-22 20:13:00Understanding the Spousal Fiduciary Duty

Gifts to Caregivers Prohibited

October 31, 2011/in Estate Planning /by Michael Lonich

An estate plan may be created to do almost anything a person desires.  For example, a will can distribute the decedent’s personal and/or real property; passing on specific items to a relative, friend, or organization.  A trust can hold specific property or funds for a designated beneficiary; any and all terms of which may be determined by the trustor.  While drafting these estate planning documents, it’s important to keep in mind restrictions that state laws impose on to whom transfers can be made.  In California, an important restriction is outlined in Probate Code section 21350.

Section 21350 outlines California’s limitations on transfers to “drafters, care custodians, and others.”  Specifically, provisions that make donative transfers (i.e. gifts) to (1) the person who drafted the instrument, (2) any person who has a fiduciary relationship with the transferor, or (3) a care custodian, among others, are strictly prohibited.  Despite the statute’s clear restrictions, there have been issues relating to who exactly qualifies under these categories.  In Estate of Austin, 188 Cal. App. 4th 512 (2010), the Fifth District California Court of Appeal needed to decide whether a former stepdaughter should be considered a “care custodian” under the statute and thus disqualified from receiving gifts.  The former stepdaughter took her former stepfather to his doctor appointments, prepared meals for him, and helped out whenever she could after he broke his hip and while he recovered from triple bypass surgery.  Decedent’s daughter filed a lawsuit seeking to disqualify her former stepsister from receiving gift transfers totaling about $185,000.

Earlier in the case, the Fresno County Superior Court ruled that the gifts to the former stepdaughter were valid.  The Appellate Court affirmed.  A care custodian is defined by California case law as someone who provides care or services to elders or dependent adults, whether paid or as a result of preexisting personal friendship.  Health or social services were defined as including cooking, gardening, running errands, assisting with banking, and driving to doctor’s appointments.  The Appellate Court found that the former stepdaughter’s “services” could not be reasonably characterized as providing substantial, ongoing health or social services and she was thus not a care custodian.  Further, the decedent made the gift transfers to the former stepdaughter while he was residing in a nursing home, when the former stepdaughter was not providing any services to him.  Therefore, the gift transfers were valid and the former stepdaughter was not disqualified from receiving them.

Statutes do not always clearly define who falls into certain categories, the courts are able to make decisions based on specific factual scenarios.  If you care for an elder relative and think you may be considered a care custodian, an attorney can help clarify what, if any, impact this may have on your ability to inherit from that relative.  If you are interested in learning more about individual gift transfers or estate planning, please contact  the San Jose estate planning attorneys at Lonich Patton Ehrlich Policastri, LLP.  Please remember that each individual situation is unique and results discussed in this post are not a guarantee of future results.  While this post may include legal issues, it is not legal advice.  Use of this site does not create an attorney-client relationship.

https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png 0 0 Michael Lonich https://www.lpeplaw.com/wp-content/uploads/2021/05/LPEP_PC.png Michael Lonich2011-10-31 14:59:412021-12-22 21:34:02Gifts to Caregivers Prohibited
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Located in San Jose, Lonich Patton Ehrlich Policastri handles matters for clients in northern California, specifically San Jose and Silicon Valley. Our services are available to anyone within the following counties: Santa Clara, San Mateo, Contra Costa, Santa Cruz, Monterey, and San Benito. For a full listing of areas where we practice, please click here.

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