The Abused Spouse - Financial Abuse and What to Look For

by Timothy P. Peabody, Esq., Family Law Attorney

With the current trend in community property distributions,
there is always the caveat:

“Am I really getting one-half of the assets we acquired during marriage?” 

Parties should always be aware of this particular issue, especially in high net worth divorces.  Particularly, with spouses who were not part of the management of community finances or business enterprises operated during the marriage.

I have had several high profile divorces in the past two years wherein the spouse managing the community business either outright stole money from the community or diverted sufficient funds leaving the supported or non-managing spouse in a position of losing hundreds of thousands of dollars of community money.  In many respects this diversion is easily accomplished especially if the spouse managing the money is the one who plans the divorce months if not years in advance. 

In one of my cases, the managing spouse told a colleague: “I am going to drain all of our community property resources and when everything appears to be gone, I am going to file for divorce.” 

Without a diligent attorney seeking to discover all financial transactions within the last five years of your marriage, you may be susceptible to the same type of financial abuse by your (soon to be ex-) spouse.

Keep in mind, the law protects the innocent spouse. 

The spouse managing the money should be held to a “duty of highest good faith and fair dealing” as a result of his fiduciary relationship with Petitioner.  In particular, Family Code Section 721(b) provides in pertinent part,

“Except as provided in Sections 143, 144, 146, 16040, and 16047 of the Probate Code, in transactions between themselves, a husband and wife are subject to the general rules governing fiduciary relationships which control the actions of persons occupying confidential relationships with each other.  This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of each other.  This confidential relationship is a fiduciary relationship subject to the same rights and duties of non-marital business partners, as provided in Sections 16403, 16404, and 16503 of the Corporations Code, including . . .”

 In addition, Family Code Section 1100(e) provides:

“Each spouse shall act with respect to the other spouse in the management and control of the community assets and liabilities in accordance with the general rules governing fiduciary relationships which control the actions of persons having relationships of personal confidence as specified in Section 721, until such time as the assets and liabilities have been divided by the parties or by a court.  This duty includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to al information, records, and books that pertain to the value and character of those assets and debts, upon request. 

Finally, Family Code Section 1101 provides in pertinent part:

“(a) A spouse has a claim against the other spouse for any breach of the fiduciary duty that results in impairment to the claimant spouse’s present undivided one-half interest in the community estate, including, but not limited to, a single transaction or a pattern or series of transactions, which transaction or transactions have caused or will cause a detrimental impact to the claimant spouse’s undivided one-half interest in the community estate.”

 “(g) Remedies for breach of the fiduciary duty by one spouse, including those set out in Sections 721 and 1100, shall include, but not be limited to, an award to the other spouse of 50 percent, or an amount equal to 50 percent, of any asset undisclosed or transferred in breach of the fiduciary duty plus attorney’s fees and court costs.  The value of the asset shall be determined to be its highest value at the date of the breach of the fiduciary duty, the date of the sale or disposition of the asset, or the date of the award by the court.”

 Make sure you are protected.