What is a “Fiduciary Duty”?
Divorce laws create a duty to act honestly to the other spouse about finances. This is called a “Fiduciary Duty,” and includes full disclosure of assets, income, debts, and financial transactions. The law requires each party to provide financial disclosures and documents. Married persons and persons about to marry stand in a confidential relationship and must deal fairly with each other. Fair and reasonable disclosure of financial status is considered a significant aspect of a spouse’s duty of fair dealing.
Wisconsin divorce statutes state that “Each spouse shall act in good faith with respect to the other spouse in matters involving marital property or other property of the other spouse. This obligation may not be varied by a marital
Stats. A financial agreement between spouses must be executed with candor and fairness.
Your attorney will ask you a lot of questions and will request a lot of documents about this in order to prepare your financial disclosures to the court. You must provide this information honestly and thoroughly. Deliberate failure to provide the financial disclosure constitutes perjury.
The fiduciary duty of a spouse requires information about all known assets and liabilities. This includes the obvious items, such as a house, cars, and bank accounts, but also things such as deferred payments, retirement and pension plans, business interests, and beneficial interests, such as a trust. A party must actively obtain fiduciary information; a court can find fiduciary misconduct if the party is passive and inactive, resulting in an evasion of producing information.
If you have property or debt from before your marriage, you must still disclose it. You should state whether these are individual or related to the marriage. You must also disclose gifts and inheritances you received during the marriage, although those are likely to be considered your individual (non-marital) property. In addition, you must disclose the rights of any other person or entity (3rd party) to your assets. For example, if your pension has been divided during a previous divorce, you must provide that financial information.
What happens if a spouse breaches their fiduciary duty?
Post-divorce, a court may award a party to a divorce a new trial, reopening the judgment, if a spouse fails to make full financial disclosure for almost any reason, even mistake. If this happens, the party asking for a new trial may recover substantial damages for the expense of retrial. The court may reach back to the time of divorce and make retroactive financial calculations.
Intentional misrepresentation, which includes omissions, is a breach of the duty of good faith. The pre-divorce remedy is that the spouse who is harmed can bring a court action up to 6 years after acquiring actual knowledge of the facts giving rise to the claim.
Upon death of one spouse during a divorce but before it is final, and has arranged transfer of marital assets, the other spouse can bring a proceeding to recover his or her interest in the fraudulently transferred marital property. The action can be against the estate of the deceased spouse and/or against the recipient of the property.
Finally, in addition to a family court action, a spouse may have an “intentional tort” action in circuit court for breach of fiduciary duty in the event of nondisclosure.
