‘Wait, We Forgot to Include Your Pension!’ An Omitted Asset in a Divorce in Nevada

It is common knowledge among divorce litigants that purposely hiding assets is unethical and can lead to very serious consequences. Yet, the question remains as to what occurs if the litigants omit assets, unintendedly, from the divorce settlement. The most common example of this scenario is an unaccounted-for retirement plan that accrued value during the marriage.

Because a final decree has been entered by the judge, is there nothing to be done? What if the good-faith omission results in a gross miscarriage in justice?

Nevada Rules Would Normally Provide Only 6 Months to File a Complaint for a Mistake

In most instances, once the judge has issued his/her final edict, the case is resolved, and the parties go on their ways in abidance with the judicial order. However, there are limited scenarios that a case might need to be reopened—for example if after the final judgment, it is discovered by one of the spouses that the order was imparted while the court presumed a material mistake in fact.

Per Nevada Rule of Civil Procedure 60(b), upon the discovery of “mistake,” “inadvertence,” or “excusable neglect” by a party to a legal proceeding, said party has up to six months from the date of the order to motion the court. In the (hopefully) hypothetical scenario we are discussing, a non-purposeful omission of a material asset from a divorce should be classified as a “mistake,” “inadvertence,” or “excusable neglect.”

Luckily, the rule also contains the provision that “this rule does not limit the power of a court to entertain an independent action to relieve a party from a judgment, order, or proceeding.” The Nevada Supreme Court interprets this sentence to best effectuate justice for Nevada citizens:

“The salutary purpose of Rule 60(b) is to redress any injustices that may have resulted because of excusable neglect or the wrongs of an opposing party…Rule 60 should be liberally construed to effectuate that purpose.” Nevada Industrial Dev. v. Benedetti, 103 Nev. 360, 363 (Nev. 1987). An omitted asset that is worth (at least) five-figures to a person without an alternative source of income is such an injustice that a court should and will remedy.

So if a court will reopen a divorce decree because of an omitted asset, how long does a divorce litigant have to file?

A Statute Regarding Omitted Assets in Divorces was Recently Enacted (Thank Our Lucky Stars)

The Nevada case law regarding an omitted asset is what I will euphemistically call less-than-consistent, and given the glaring inconsistencies, I just don’t see the benefit in walking you through the changes in the law over the years.

The confusion crested in Doan v. Wilkerson, 327 P.3d 498, 501 (Nev. 2014), when the Nevada Supreme Court dismissed its previous common law precedent and declared that “[i]f the legislature had intended to vest the courts with continuing jurisdiction over property rights, it would have done so expressly…policy in favor of finality and certainty underlying NRCP 60(b) applies equally, and some might say especially, to a divorce proceeding. Therefore…we hold that NRCP 60(b)'s time limitation applies to a motion for relief from or modification of a divorce decree.”

Without action from the Nevada Assembly, such a decision would have incentivized the hiding of assets, because once the 60(b) time limit lapsed, there would be no further recourse available for the injured spouse. Fortunately, our noble Nevada legislature was up to the task and responded—just like our founding fathers wrote it up—with an amendment to NRS 125.150.

The revised law now says that a divorce judgement “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.” Why three years? Mostly likely, the assembly chose to adopt a similar three-year statute of limitations for other mistakes in fact that is found in the Period of Limitations law, NRS 11.190(3)(d).

The Nevada Assembly clarifies in the legislative notes that the intent of the bill is to empower judges to rectify unjust results when necessary. “This bill further provides that the court has continuing jurisdiction to hear such a motion and must make an equal disposition of the omitted community property or liability unless the court finds that certain exceptions apply.”

Is the Three-Year Time Limit for Omitted Assets Fair?

There is a reasonable argument to made that the statute of limitations is unreasonable at three years because the omitted asset is most often a pension plan—and such a discovery often does not occur until the litigants near retirement. Such a statute of limitations will only protect older divorce litigants; yet, the law should provide justice to everyone equally.

On the other hand, there is a strong public policy incentive for the finality of judgments. Folks would not make long-term investments if there was the potential that any resolved judgment could be reopened at any time in the future. Courts need to account for this as well.

In conclusion, perhaps the three-year window is too small. Conversely, a proposal for an unlimited statute of limitations is untenable. Perhaps the best approach is to extend the window to six years to permit folks extra time to analyze the financials of the divorce once the emotional toll has worn off. Remember, laws aren’t perfect—they are only our best attempt at justice.