What if a Divorce Decree Omits Assets?
In divorce cases, it’s not uncommon for an asset to be omitted or overlooked in the final divorce decree. This can happen unintentionally due to misunderstandings, lack of proper disclosure, or even intentional concealment of assets. Regardless of the reason, omitted assets are still considered marital property and can have a significant impact on the final settlement.
The rules of divorce court require both spouses to fully disclose their assets and debts. This way, the court can distribute all the assets evenly and divide all the debts. If there are missing assets or debts, then the court order is incomplete. Courts do not like incomplete divorce orders because they leave loose ends that may unravel down the road. The court wants a final divorce decree that discusses all the issues.
Despite the rules in place to list all the assets, sometimes a final divorce order doesn’t include all of them. The assets may have been purposely omitted or accidentally omitted.
In cases where a spouse is purposely hiding an asset, your Las Vegas divorce attorney can take several steps to force the disclosure of the hidden assets. So, purposeful omission is not as common. The more common issue is where both parties worked together in good faith, but simply neglected to list an asset. This is often the case when clients use self-help divorce forms to file for divorce.
It is immensely important to disclose all the assets and to mention them in the divorce decree. Failure to list all the assets can lead to major legal headaches in the future. If you discover that an asset has been omitted after the divorce decree has been finalized, there are important steps you can take to address the issue.
How Divorce Assets Get Omitted
An omitted asset is any property or financial account that was not included or addressed in the final divorce decree, whether by mistake, oversight, or concealment. These can include various types of property such as real estate, business assets, bank accounts, retirement accounts, cash or physical assets like jewelry, artwork, or collectibles, and life insurance policies, especially those with significant cash value.
It’s important to note that if an asset was acquired during the marriage, it is generally considered marital property and thus subject to division, regardless of whether it was mentioned in the divorce decree.
When dividing community property, it is not unusual for old assets to be forgotten. Forgetting about an old life insurance policy, an old savings account, or a 401 (k) from an old employer can happen. Fixing that type of omitted asset is fairly simple. In that situation, most spouses can simply divide the assets equally without requiring a court hearing.
For example, Janet and Mike have been divorced for two years. They were married for 13 years. Janet was a nurse while Mike worked for the carpenters’ union. One day, several months after the divorce was final, Jane got a letter in the mail containing an account statement. The statement was for a retirement account Mike earned from a job he had when they first got married. Mike has only had the job for 2 years. This retirement account was never mentioned in the divorce decree. They both forgot about the account.
Janet and Mike did not list the account in the decree because they both forgot it existed. The retirement account is an omitted asset. With interest, the account has ballooned to almost $8,000. Half of the balance belongs to Janet. If they both agree, they can divide the account without filing a new divorce decree with the court.
The bigger issue is when the asset is left out of the divorce decree because the spouses do not think the asset should be divided. What if Janet owned a home before marrying Mike? After the wedding, they moved into Janet’s home, and for the next 13 years, they both worked. Janet used her income to pay the mortgage, while Mike paid utilities and other expenses. They did not list the home in the divorce decree because they both felt the home was Janet’s.
The home is in Janet’s name, but under Nevada law, a portion of the equity in the home is community property. This is called a community interest in separate property. We discuss this in more detail in our Malmquist v. Malmquist article. If this home is left out of the divorce decree, you have an omitted asset. It does not matter that they both purposely left it out. Part of the house was community property, and it was a mistake to leave it out. Years later, Mike could take Janet back to court for his share of the equity in the home.
Types of Assets That Are Often Concealed in Divorce
Some assets are more commonly hidden during a divorce, and it’s important to be aware of these to help identify potential omissions. Commonly concealed assets include cash or unreported bank accounts, businesses or ownership interests in companies, real estate like vacation homes or rental properties, retirement accounts, and life insurance policies with significant cash value. In some cases, personal property such as jewelry, artwork, or collectibles may be hidden as well.
New Nevada Omitted Assets Rule
When omitted assets are found, it means the previous divorce decree is no longer the final decree of divorce. The omitted asset is still a live issue. Community property that was omitted can be revisited by the court. Your ex-spouse can come back years later and ask the court to reopen the case and divide the omitted asset.
Laws regarding omitted assets vary by state, particularly regarding the statute of limitations for reopening divorce cases. Some states allow reopening a case for a limited period after the divorce is finalized, while others may extend the timeframe if the omission was the result of fraud or a mistake.
For many years, the court only allowed six months to reopen a case. When omitted assets were discovered, the court used Nevada Rule of Civil Procedure 60(b). According to the rule, upon the discovery of a “mistake,” “inadvertence,” or “excusable neglect,” you have up to six months from the date of the original order to ask the court to divide an omitted asset or debt. The omission would need to be classified as a “mistake,” “inadvertence,” or “excusable neglect”.
To reopen the case, one party had to reopen the case within six months of the final order. Our lawmakers felt six months was too short a deadline. The judge did have discretion to make exceptions to the six-month deadline if they felt it necessary. Judges rarely used their discretion, so six months was the effective deadline to discover the omitted asset.
In 2015, the Nevada legislature extended the period for reviewing omitted assets. Under the new Nevada law, NRS 125.150(3), any divorce decree may be reopened within three years of the discovery of an omitted asset if the omission was by fraud or mistake.
The omission can be a result of “fraud”, “mutual mistake”, or “unilateral mistake”. A unilateral mistake is where one spouse knew about the asset, but the other spouse didn’t. Unilateral mistakes are similar to fraud. If it is determined that Mike knew about the retirement account, the judge has the discretion to sanction Mike and award Janet more than her equal share.
A mutual mistake is where both spouses forgot about the asset, or where they misunderstood the law. It doesn’t matter if both Janet and Mike omitted the home because they both thought the home was hers. There is a community property interest in the home, whether they know the law or not. Mike has up to three years to open a court case to have the equity divided.
This is why we always advise clients to list all the assets and debts in the divorce decree. You are protected better by listing every asset and every debt in the decree.
In our example above, the spouse seeking to divide the omitted asset has up to three years to file a claim with the court. The first step should be to meet with a licensed Nevada divorce attorney. Preferably one who practices in Family Court. The divorce attorney is most likely going to send the ex-spouse a letter. If the ex-spouse ignores the letter, then a motion with the court would be filed. A motion is where the attorney requests the court to review the claim and hold a hearing. At the motion hearing, the court will review the omitted asset claim and decide whether the asset has indeed been omitted. If it has, the court will value the asset and divide it equally.
What to Do When You Discover an Omitted Asset
If you discover an omitted asset, the first step is to determine whether it was an accidental omission or intentional concealment. Each scenario may involve different legal consequences.
The first action you should take is to consult with a family law attorney. It’s critical to seek legal advice to understand the best approach based on your specific situation. A family law attorney can help you assess the situation, gather evidence, and navigate the legal process for reopening the divorce case. They will also help you determine if the omission was due to fraud or a mistake, both of which have different legal implications.
Next, start collecting all relevant documents and information about the omitted asset. This could include bank statements, property deeds, business ownership records, or other financial documents that prove the asset’s existence and value during the marriage.
If both spouses are open to it, the next step is to attempt negotiation or mediation to resolve the issue without involving the courts. This can help save time, money, and potential emotional stress by reaching an agreement privately.
If negotiation or mediation doesn’t work, you can file a motion to reopen the divorce case with the court. This motion asks the court to revisit the case, review the omitted asset, and make necessary changes to the property division.
If it is determined that the asset was intentionally hidden, the court may take action against the spouse who concealed it. The legal consequences can include financial penalties, sanctions, or even contempt of court charges, which can result in fines or jail time in extreme cases.
Potential Legal Consequences for Concealing Assets
Intentionally hiding assets during divorce proceedings is considered fraudulent behavior and can have serious consequences. If it is proven that one spouse concealed assets with the intention to deceive, the court can impose various penalties, including redistributing the property, requiring the spouse who hid the assets to pay additional monetary penalties, including attorney’s fees, and ordering a larger share of the property for the other spouse. In extreme cases, deliberately hiding assets can result in contempt of court charges, leading to fines or imprisonment.
Hidden assets can also affect spousal or child support calculations, potentially increasing support payments if new assets are discovered after the divorce is finalized.
How to Prevent Omitted Assets in the Future
To avoid the complications of omitted assets in your Nevada divorce, all assets and debts must be fully disclosed before finalizing the divorce. Working with a forensic accountant can help ensure that everything is accounted for, especially in complex financial situations. Additionally, consulting with an experienced attorney to understand the legal requirements for asset division in your state and ensure your rights are fully protected can help you avoid future issues.
Contact a Nevada Divorce Attorney If You Believe Assets Have Been Omitted In Your Divorce Case
Do you think an asset has been omitted in your Nevada divorce case? Call (702) 914-0400 to speak with a Las Vegas Divorce Attorney or use the Calendly link below.
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