It is commonly known among divorce litigants that purposely hiding assets is unethical and can lead to very serious consequences.
Yet, one wonders what occurs if the litigants omit assets, unintentionally, from the divorce settlement. The most common example of this scenario is an unaccounted-for retirement benefit or a military pension that has accrued value during the marriage.
Let’s try to understand omitted assets through this short tale:
For the previous 10 years, Tony and Carmela were living the optimal, happily married, Las Vegas life. Carmela enjoyed her work in finance, and Tony enjoyed his work in video game development. About 6 years ago, Tony, a video game enthusiast, traded his pristine Atari game console to a friend for a factory-sealed Super Mario Game—after which, Tony as does, forgot about the transaction and threw the game in a box in the garage where it remained until last week.
Unfortunately, things did not work out for Tony and Carmela, and they agreed to a divorce settlement last year that included allocation of what they thought was all their relevant assets including retirement plans/pensions. Last week, Tony read an article about a new Super Mario game that fetched more than $100,000 at auction—this triggered his memory! Alas, there was the video game in the very box in the corner of the garage where he left it. And wouldn’t you know it, but the discovered game has been valued for the same $100,000. Tony thinks the game is his; Carmela obviously disagrees.
Tony believes that since the divorce settlement is final, the game belongs to him. Carmela believes that the game is community property from their marriage that was mistakenly omitted from the divorce settlement; therefore, she is entitled to half the proceeds from the sale. Let’s unpack this a little more to see who is correct.
What Happens When There are Omitted Assets?
Normally, Litigants Only Have Six Months to Report a Mistake in Fact
In most instances, once the judge has issued his/her final edict, the case is resolved, and Tony and Carmela go on their ways in compliance with the judicial order. However, this is one of the limited scenarios that a case might be permitted to be reopened.
Nevada Rules typically only permit Carmela to file a claim for omitted assets, like the Mario game, up to six months after her final judgment. The Nevada Supreme Court has ruled that judges may make exceptions to the six-month rule if it is necessary to effectuate justice in a matter—like a spouse missing out on her fair share of a six-figure asset.
So if a court will reopen a divorce decree because of omitted assets, how long would Carmela have to file?
As of 2015, Divorce Parties Have Three Years to Inform the Court of a Mistake
The Nevada case law regarding omitted assets over the years was a bit disjointed, and in response, the Nevada legislature codified a standard so that divorce cases would be adjudicated in a uniform manner.
Without action from the Nevada Assembly, the courts had established a standard that upon the expiration of the six-month time frame, Carmela would be barred from ever pursuing her share of the video game proceeds. Fortunately, the Nevada legislature was aware of the issue and amended NRS 125.150 to say that now a divorce judgment “as the result of fraud or mistake” may be reopened “within 3 years after the aggrieved party discovers the facts constituting the fraud or mistake.”
Now let’s go back to Tony and Carm. Recall that the divorce settlement was enacted one year ago, with Carmela only learning last week of the omitted asset, (to her credit, few among us would have checked the video games in the garage). In a typical suit, Carmela would have had only six months to inform the court of the mistake—thus, she would have been left without recourse.
Yet, with the 2015 amendment to NRS 125.150, Carmela now has three years to file her claim with the court. But let’s tease this out just a bit more: what if instead of remembering the Mario game last week, Tony recalled the exchange 4 years from now.
Is the Law Fair to a Spouse like Carmela Regarding Omitted Assets?
Should it really make a difference if Tony or Carmela discovers the mistake four years from now? The issues of justice and fairness for Carmela are arguably as pressing four years (or six or eight) as they are now. So why the limitation?
Well, there is a strong public policy incentive to encourage the finality of judgments. Investors, for example, are disinclined to make long-term commitments if there is the potential that any resolved judgment could be reopened at any time in the future. We live in a market economy after all and cannot ignore this need for stability.
Possibly, the three-year window is too small. Conversely, any proposal for an unlimited statute of limitations will be seen as untenable by the business community. The best approach might be to middle the issue: extend the window to six years to permit litigants extra time to analyze the money side of the divorce once emotions have cooled. Spouses like Carmela certainly deserve a little more time to ensure justice is served.
Stacy Rocheleau has practiced divorce law for 18 years, helping clients with uncontested divorces, legal separations, and contested divorces. Among her accolades, Ms. Rocheleau was elected the best divorce attorney in her home State of Nevada for 2017 & 2018.