One of the privileges of being married is that it comes with a host of legal duties and responsibilities. For example, under Family Code section 721, every spouse owes a duty of the highest good faith and fair dealing in transactions undertaken between spouses (try using that argument next time you want to watch your favorite show and your spouse says no). This is the same duty that applies to non-married business partners, referred to as a fiduciary duty.
The Presumption of Undue Influence in Marital Transactions
When one spouse gains a benefit or profits in a transaction with the other spouse, there arises a presumption of undue influence (Lintz v. Lintz). That can be a powerful presumption in the world of Trust and Will litigation because it gives beneficiaries an avenue to attack a spouse for a change in an estate plan that benefits the spouse over the children.
Navigating Asset Transfers and Inheritance Issues in Second Marriages
For example, in a second marriage where each spouse has children from a prior marriage, the transfer of assets (especially separate property assets) from the owner-spouse to the new spouse could be a violation of the fiduciary duties set out under Family Code section 721. What normally would look like a simple intra-spousal gift can rise to the level of presumed undue influence. That puts new spouse on the defensive and requires him or her to prove the lack of undue influence, which can be hard to do.
What does this all mean? It means that moving assets around between married couples can create a few problems if not handled properly. The gifts that are made between spouses need to be done in good faith. And the interests of the children should be considered.
That does NOT mean that the children cannot be disinherited. It just means that a proper approach to documenting the disinheritance is in order. Take the time to explain what is happening and why it is happening. Otherwise, a negative legal presumption can arise that will sink the gift to your new spouse before it ever gets afloat.
