Last week we began to explore the “Fiduciary Duty” between spouses legally obligate spouses to care for each other financially with the utmost consideration and duty.
There are certain things that a spouse may not do with regard to the community property without prior permission–it is important that couples be aware of these issues because it is often the case that one spouse is given (or takes) the responsibility of managing assets or finances, and this can sometimes lead to even an inadvertent violation of fiduciary duty.
The first two types of property that can be problematic are non-real property sales or gifts, and real property sales or gifts. A more complicated set of rules govern business (we’ll get into business interests next week).
- A spouse may not make a gift of community personal property, or dispose of community personal property for less than fair and reasonable value, without the written consent of the other spouse.
This rule does not apply to gifts (or things sold for less than fair and reasonable value) when this property is mutually given by both spouses to third parties.
It also does not apply to gifts (or things sold for less than fair and reasonable value) given by one spouse to the other spouse.
In other words, if you want to give your brother a “deal” on a community property asset, you better get your spouse’s consent in writing.
- A spouse may not sell, convey, or encumber community personal property used as the family dwelling, or the furniture, furnishings, or fittings of the home, or the clothing or wearing apparel of the other spouse or minor children which is community personal property, without the written consent of the other spouse.
Here, let’s focus on real property. Along with the other assets detailed in 2., one spouse may not sell community property real property, [i] even at fair market value [i] without prior written consent of the other spouse.
If you think the writing requirements are burdensome based on your understanding of your spouse’s character, keep in mind the unfortunate fact that sometimes these actions are brought by a spouse’s heirs after the spouse has passed, or by conservators or guardians if the spouse had become incapacitated.
A common mistake is also to “pre-adjudicate” what is or is not or could be community property (“this doesn’t apply to me because my husband and I know that house X is my inheritance . . .”) Attitudes and opinions change, and there are many non-obvious ways an asset which looks to be separate property can take on a community character. A good rule: unless have a written, technically-sufficient writing from your spouse indicating that an asset is your separate property, then it is prudent to obtain written consent for the above-referenced sales.
Next week we will address the application of fiduciary duties to business interests.