Navigating Wisconsin’s Marital Property Act

WBA’s top two marital property questions

By Scott Birrenkott

The Wisconsin Marital Property Act presents unique community property considerations for Wisconsin banks. While nothing has changed in this area of law, its nature gives rise to some frequently asked questions. Below are two of the most commonly received questions through the Wisconsin Bankers Association’s (WBA) Legal Hotline.

Question 1: Is a bank permitted to pull credit on a non-signing spouse?

Answer 1: Yes. When dealing with married Wisconsin residents, a bank is permitted to pull credit on a non-signing spouse and may even be required to do so.

Wisconsin Section 766.56(1) requires creditors to consider all marital property available to satisfy the debt when evaluating a married Wisconsin resident’s application for family purpose credit. Where there is an obligation in the interest of the marriage or family, being a “family purpose” obligation, the creditor must consider all marital property available to satisfy the obligation in the same manner that it considers the availability of property of an unmarried applicant. While the law does not define “family purpose,” the presumption is that an obligation incurred by a spouse during marriage is

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Compliance Column

Scott Birrenkott

family purpose. Additionally, income would be presumed to be marital property unless there is a marital property agreement indicating otherwise. Because the Wisconsin Marital Property Act requires creditors to consider all marital property available to satisfy the debt, a bank may be required to do so.

Regulation B Section 1002.5(c)(2) allows the bank to request information about the applicant’s spouse if the applicant resides in a community property state or is relying on property located in such a state as a basis for repayment of the credit requested. As Wisconsin is a community property state, banks are permitted to pull credit on a non-signing spouse.

Question 2: How does the Homestead Rule Affect Mortgages for Married Wisconsin Residents?

Answer 2: Wis. Stat. Section 706.02(1)(f) requires that each spouse with homestead rights must sign the mortgage for it to be valid unless an exception applies. In this context, homestead means the dwelling, and so much of the land surrounding it as is reasonably necessary

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Visit the compliance section of the WBA website at wisbank. com/resources/compliance for use of the dwelling as a home, but not less than onefourth acre, if available, and not exceeding 40 acres. It is WBA’s understanding that title companies are typically able to provide an indication of whether the property would be considered a homestead under this definition.

Once a bank has determined the pledged property as a homestead, the bank must consider Section 706.02(1)(f). If the mortgage alienates any interest of a married person in a homestead, then each married individual must sign the mortgage in order for it to be valid.

The only exceptions to this rule are for conveyances between spouses and for purchase-money mortgages.

Conclusion

While these are the top two questions received by the WBA legal department, this list does not exhaust what marital property questions the team receives. As such, more frequently asked question related to Wisconsin’s Marital Property Act can be found at wisbank.com/compliance

Birrenkott is WBA director – legal. For legal questions, please email wbalegal@wisbank.com

Note: The above information is not intended to provide legal advice; rather, it is intended to provide general information about banking issues. Consult your institution’s attorney for specific legal advice or assistance.

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