Have you ever heard of the 3 rings of marriage? First you have the engagement ring. Then, the wedding ring. Finally, there’s the suffering! Corny joke (I like it a lot). But I’ve been married and use it sometimes as cautionary advice. It’s also a great icebreaker when it comes to discussing spousal consent.
The concept of marriage isn’t a fairy tale. It’s hard and it requires transparency between spouses.
Marriage changes everything.
One’s personal life, professional life, legal status, child custodial rights, and finances undergo dramatic legal changes, depending on where you live, as a consequence of saying, “I do.”
Marriage is really kind of like a two-person LLC. Actions of the one affects the other.
Consent, or spousal consent, may be required in many aspects of marital life, especially loan applications.
That’s why it’s important to think about spousal consent in marriage before a lawyer or judge familiarizes you with the concept.
My point is that marriages work best when there is communication, trust, and mutually beneficial attempts to earnestly understand one another.
Still, over 50% of all marriages end in divorce.
Financially broke newlyweds who stay broke after 3 years get divorced 70% of the time.
One thing that is anathema to the concept of spousal consent, and the cause of many divorces, is money.
That’s why spousal consent is required in many loan approvals processes.
What is Spousal Consent?
Spousal consent, also known as, “marital consent,” is basically a legal declaration that includes and/or excludes a spouse from the benefits of an application or process since it affects both spouses.
Like a loan application.
In other words, you’ll need the consent of your spouse before applying for a loan, mortgage, business license, or some other process.
The success, or failure, of a loan application financially impacts both spouses.
Legal requirements for spousal consent differ from state to state.
Confused? Let’s break it down a little.
Imagine you, a married person, want to open and solely own a franchise restaurant.
To get approved for a business loan, you may need spousal consent. Your spouse might be required to sign a document promising to assume the loan if you die.
Or, the income of the second spouse could be collateralized for the loan.
Additionally, the lender may want to legally protect themselves in case one spouse is trying to launch a business without the other spouse knowing.
There could be numerous reasons why spousal consent could be required in a loan application process.
So, when exactly is spousal consent required for a loan application?
It depends on where you live, the loan application process, and local laws.
Financial lenders live to minimize their risk, which is why spousal consent may be required in numerous, and legally specific, lending situations.
This isn’t a one-situation-suits-all requirement.
Mortgage Applications
Even though the title and deed of a property could be in the name of one spouse only, a mortgage lender may not approve a mortgage application without express spousal consent.
Why? They may be trying to minimize their risk and make the second spouse liable if the primary spouse can’t pay.
Or, a lender may want to legally protect themselves from lawsuits. Remember that over 7 million
Americans hide money from their spouses and significant others.
If a mortgage lender approves a loan for the borrower spouse unaware that the non-borrowing spouse is unaware, they could be liable to lawsuits in a future divorce hearing.
Spousal consent for mortgages is automatic in community property states.
Borrowing From Retirement Accounts
You may be able to borrow against your own 401(k), IRA, pension, or retirement account pre-retirement.
Basically, you’re loaning money from your retirement account to yourself, even though stiff penalties might be incurred.
Before the spouse who owns the retirement plan can borrow against it, the other spouse may have to sign consent.
Why?
Well, the policyholder spouse probably has the other spouse listed as a beneficiary.
So, some employers or companies want to make sure the beneficiary spouse is aware of such events.
Also, the employer and finance company offering the retirement plan don’t want to be liable for lawsuits if the policyholder borrows against their own retirement account, and bankrupts it, unbeknownst to the beneficiary spouse.
Talk to Your Lawyer (Seriously)
The truth is that spousal consent laws and requirements vary depending on where you live and the local laws.
There are too many exacting examples and variations of the need for spousal consent, especially for loan requirements, to consider.
Still, not knowing you needed it after the fact won’t absolve you legally. (Or get you out of hot water with your spouse).
It doesn’t pay to assume anything when one spouse wants to take out a loan that will affect the lives of both spouses.
Ask your lender. It really pays to consult a lawyer in such situations as well.
Trying to acquire a loan without spousal consent can end up becoming very costly in the event of divorce.
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Allen Francis was an academic advisor, librarian, and college adjunct for many years with no money, no financial literacy, and no responsibility when he had money. To him, the phrase “personal finance,” contains the power that anyone has to grow their own wealth. Allen is an advocate of best personal financial practices including focusing on your needs instead of your wants, asking for help when you need it, saving and investing in your own small business.