What if a Divorce Decree Omits Assets?
The rules of divorce court requires 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 it leaves 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, the 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 with 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 the 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.
How Assets Get Omitted
When dividing community property, it is not unusual for old assets to be forgotten. Forgetting about an old life insurance policy, an old savings accounts, or 401k from an old employer can happen. Fixing that type of omitted asset is fairly simple. In that situation most spouses can simply divide the asset 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 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.
New 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 open the case and divide the omitted asset.
For many years the court only allowed six months to re-open 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 had 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 law makers felt six months was too short of 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 time 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 or “fraud”, “mutual mistake”, or a “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.
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