230 | How to Financially Navigate Your Divorce with Karen Sparks, CDFA®




Welcome to episode 230 of Love, your Money! In this episode, we’re continuing the conversation on the financial implications of divorce. And today, I’m joined by Certified Divorce Financial Analyst®, Karen Sparks.

Karen is a speaker, author, and founder of Divorce Financial Strategists. For over 10 years, she has assisted families (as well as legal and financial professionals) in navigating a divorce, dividing and allocating personal assets, and preparing couples for success in the next chapter of their lives.

Having experienced a divorce herself, Karen found her calling and wanted to combine her expertise in the finance world as a CFO to fill a much-needed gap: helping others get through an incredibly emotional period of their lives and retain what is rightfully theirs.

In our conversation, you’ll learn why it’s critical to locate and gather necessary documentation immediately, where important assets are held, and how many years’ worth of documents are needed to settle a divorce when a family business is involved.

Here’s what you’ll find out in this week’s episode of Love, your Money:

  • How an expert analyzes the personal situation
  • Actions that derail an amicable divorce from happening
  • Advice on where to start when an divorce is inevitable
  • How long a divorce is kept a secret from the spouse
  • The importance of documenting everything
  • Divorce scenarios where a CDFA will add value

Inspiring Quotes

“I always recommend that you deal with your money first and you find out where that’s sitting, and you find out where you’re going to have some risk factor where you have exposure.”

“I want people to be smart about this process. I want people to get their power back, get their voice back. It is emotional. There will be days when you’re just crumbling. There’ll be days when you’re going to feel powerful.”

Resources and Related to Love, your Money Content

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Hilary Hendershott: Welcome back to Love, your Money. Today, we’re talking about divorce and separation. I never know if when we talk about divorce or separation, if you’re happy to be getting divorced or if you’re not, so I’m not going to pretend like this isn’t always happy topic. But happily, for me, I have with me today, Karen Sparks. So, today’s conversation is an add-on to last week’s episode where I talked about some of the issues we see with our divorcing clients in my wealth management practice.


Karen is a CDFA, which is a Certified Divorce Financial Analyst. She’s also a JD, Juris Doctor. She’s the principal and owner of Divorce Financial Strategists. In her capacity as a divorce financial analyst, she provides expert financial services that are specifically targeted to the area of divorce and separation. As part of her engagements, she has been a retained expert and trial expert witness for clients on the subject of marital standard of living, analysis and computation of separate and community property interests in real estate and valuation of business entities. Oh, so important because most attorneys do not understand how to do this. She is also the coauthor of the Stress-Free Divorce Volume 01, published in April 2017. So, she offers financial analysis services to individuals and couples who are divorcing and separating.




Hilary Hendershott: Welcome to Love, your Money, Karen.


Karen Sparks: Good day. Welcome, Hilary, and welcome everyone to the podcast today.


Hilary Hendershott: Thank you for being here. Give us a little sense of how you ended up in your current role. What a calling in life.


Karen Sparks: It is a calling. And it really started when I sort of entered my second iteration of life, as I like to call it, post my own divorce, and was working very actively in the legal field in various capacities supporting partners in trial work and whatnot. And whether it was colleagues, whether it was friends or associates, always seeing a lot of dissatisfaction with the divorce process. My own did not involve that much texture, but I still had my own individual issues. So, any event, when I did come through my own divorce and was restarting my own existence, I decided this is what I wanted to do. I really wanted to combine my expertise in the finance world as a CFO because when I left the law firm world prior to my divorce, after my divorce, I entered a more financial side. I wanted to really combine my expertise to provide that level of service to clients in this space of the finances. So, I was doing too much dissatisfaction with taking of assets, why things were sold, why things were kept, not understanding things in real time, and the tax implications and post-divorce implications. So, also, that’s kind of what drove me to the work.


Hilary Hendershott: Very interesting. And how long ago was that?


Karen Sparks: Fourteen years.


Hilary Hendershott: Amazing. So, I just can’t imagine what it’s like to be you, but you’re here to share that with us.


Karen Sparks: Yes.


Hilary Hendershott: So, one of the things you said to me, and I’ve found it very interesting how you think about analyzing a divorce. One of the things you said to me was, the first thing you really look for is to analyze the personal situation. Tell me, how do you analyze the personal situation between two spouses who may be separating or divorcing? And what implications does that have on the process?


Karen Sparks: It has huge implications. One of the very first things that I do when I’m in conversation with potential client family is, in addition to the salient facts which need to happen, there are some benchmark facts that I need to know, but I’m more interested in an exploratory meeting with finding out what the pain points are, finding out what the priorities are, finding out what are the things that are top of mind. What are the things, as a professional, I’m going to need to be on the lookout for? Is there any type of addiction situation going on? Are there perceived power imbalances going on? What has been the energy between the two people in regards to how money is being handled? Has somebody actually taken hold of it? Has it been collaborative? I need to know some of these background facts. So that as I begin to work through the finances in that marital bucket. I’m knowing what’s on the outside of that. And I can then work to make sure that maybe we don’t take some hits, don’t take some speed bumps, because I’m aware of how to work around some of these things and bring conversation to a point that’s going to be beneficial to both parties.


Hilary Hendershott: So, you mentioned addiction. You didn’t mention domestic violence. But I think maybe what’s more common, and I would love to hear what you think when you hear if you hear that issue is involved, but do you have an objective scale on which you evaluate the collaborativeness of a couple? So, for example, when you meet folks, do you think to yourself, are these two really going to cooperate? And if so, do you measure that in any specific way?


Karen Sparks: It’s sort of not an organic measurement. It’s sort of what I kind of do professionally. So, I really apply what I’ve come to call the circle concept. So, when I’m working with a couple and when it seems like really a lot of them, there’s going to be a certain amount of emotional energy, period, which is part of the process. But when that emotional energy is significantly larger than the work that I need to do on the finance side, then I know that maybe they’re not quite ready. They will be ready for it, but not quite ready. So, it’s at that time that I identify that energy, and I make recommendations to the couple about allied professionals that I think they may want to spend a little bit of time with first and sort of work through some of this and then, bring me right back into the process so that we can pick up and do some real good work.


So, it’s really an active listening. It’s an active analysis in real time. I’m reading, I’m paying attention to body language, even though it’s in a video conference format. I’m active in those engagements, and I’m reading their body language. And no, I did not mention domestic violence, but that is certainly something that I want to know about as well. Just so your listeners know, I went through that myself, so I’m clear. I’m clear on all the benchmarks, on all the triggering. I’m clear on the abuse wheel. And I also help people realize where they are on that wheel as well because some people think it’s active. The domestic violence is a very active thing, but it’s also a very inactive thing. And there are a lot of subliminal things that can be done that really add up to that. So, I also want to particularly let my female clients know where they stand on that if I’m feeling and reading that from our meeting.


Hilary Hendershott: I got it. And so, what are the kinds of things that cantankerousness or disagreements can prevent couples from accomplishing in a divorce?


Karen Sparks: I think one of the key things and just experienced that this morning in a new client engagement, one of the key things that leads to that, I would say, particularly, for anyone who has been the CEO of the house, and I do say the CEO of the house, I don’t say housewife, I don’t say domestic engineer, I say CEO of the household. So, you are the reason why, you are the reason for the season. The reason why everybody’s life is in order is because of you. When you were in that position, I would say majority of the time, this is 2024, it’s really ridiculous for me to be saying this, but that position is not respected. So, that leads to a lot of discord in terms of what the breadwinning individual is sort of feeling, right? And they’re feeling a little bit about themselves. Like, you just need to get a little bit of this.


You end up being treated almost like one of your minor children because it’s not respected. So, that’s going to lead to some discord automatically because they’re going to have a different point of view come into this story. Like, you only need this, this is what you spend, this is what you’ve always spent, da, da, da, da. And that’s a gross misunderstanding of how the divorce process works. So, that’s one thing that I can point to, for sure.


Hilary Hendershott: Okay. And if you were giving in terms of how to manage the personal relationship, of course, not everything is 50/50, but each partner in the relationship has some power as it regards how well are we getting along today, right? We all know how to press buttons. We all know the things that bother our partner. So, if you were giving your best advice to someone who knows that a divorce is in her near-term future, what would you say? Because it’s a balance sometimes between being the peacemaker and serving your own interests, taking care of yourself, or having boundaries. How would you speak to that?


Karen Sparks: If anyone is really thinking about divorce, the first thing I want you to do is stop and breathe. So, let’s do this. If you feel as though this is a direction the relationship is going, we all get those markers. We all get those feelings, those six senses that is not there. They may be active or inactive, right? So, the first thing I want somebody to do is just stop and breathe for just a moment. All right.


The second thing I want individuals to do, particularly if you haven’t handled the finances in a major sense, I want you to start looking at what you need. Where are the documents that you’re going to need? Where are they housed? Do you have passwords to accounts? Do you have visibility to key accounts and key paperwork? If some of that stuff is in vaults or safes or in folders in the home, you want to make sure that you take some time when you are alone in the home, okay, so this is very important, to make sure that you get the information you need. This is going to be needed by professionals like myself. It’s going to be needed by counsel if you hire a counsel. Everyone is going to start asking you the same questions. So, start taking account of what you have access to and start pulling that together, whether that’s electronically, whatever form you can get it in, make sure you have it. So, that’s one of the first things that I want to say to someone.


The second thing I will say to someone is, now, take a look at your personal dynamic. What’s going on? What’s the power play? All right. Your team is everything. So, who is going to really need to support you? I want people to step away from this knee jerk reaction of your commentary from your neighbor, your sister, your mom, whoever.


Hilary Hendershott: Oh, my goodness. Please. Thank you. Stop taking advice from strangers.


Karen Sparks: Some of them are coming from a position of love and care. Okay? So, we want to support that.


Hilary Hendershott: Always.


Karen Sparks: But your situation is your journey. So, you have a lot of people speaking into your world, okay? You’re attempting to speak into your space. A lot of noise. Okay. I need for the individual to sit down and say, “What do I need?” Do I need to understand this money? Then you need a CDFA professional almost immediately to give you that education, to give you that grounding. Is somebody pulling you in to mediation or pulling you in to some sort of process? Is the other person saying, “This is what I think we need to do”? Okay, hold on. All right. Are you prepared to even be in that process? Do you even know what’s going on? Okay. You need to make sure you bring the right team members in. I always recommend that you deal with your money first, and you find out where that’s sitting, and you find out where you’re going to have some risk factor where you have exposure.


Hilary Hendershott: Say more about that. What do you mean? Risk factor, like concentrated stock?


Karen Sparks: Concentrated stock. Where are you sitting on some of these marital assets? What positioning do you have with these marital assets? These are the things that you need to understand before you start “making demands” or kind of putting your foot down. If you don’t know what you’re putting your foot down on, don’t put your foot down. You need to know what you’re doing and what that risk factor is, and bring that into fruition and understand what all the components are of that. That is so, so key that you do that. Those are some of the things that I would be talking to people about as they’re coming through and as they’re building. And I will leave your listeners with a statistic and they can just answer it silently. But how many years in advance do you think an individual is thinking about divorce before they take action? Somebody answer that for you.


Hilary Hendershott: Tell me. I have my guess.


Karen Sparks: Okay, so it’s two years.


Hilary Hendershott: Oh, wow.


Karen Sparks: So, I want you to think about that. That’s two years, as somebody has been thinking, meditating, doing whatever they do under the guise of marriage. There we go, planning. Thank you. Under the guise of being married. So, none of it’s questioned, right? Because it’s all a part of the regular flow of the way the family is living. So, with that statistic, understand that there’s going to be a lot of work to do. There’s going to be a lot of work that you’re going to need to understand, and there’s going to need to be a lot of transparency in this action.


Most states across the country have a disclosure process. They do it differently, but it ends up the same way. So, both parties are going to need to either kicking and screaming or voluntarily be brought to the table in producing documentation and all types of things, laying out income and expenses, assets and debts. Like I say, you’re either going to do this voluntarily or brought to the table kicking and screaming. Doesn’t matter. You’re going to get there, right?


So, I want people to be smart about this process. I want people to get their power back, get their voice back. It is emotional. There will be days when you’re just crumbling. There’ll be days when you’re going to feel powerful. But the most important thing you want to do is make sure that you have the right people giving you the right stuff at the right time, so that your outcome at the end will be something that will make your next iteration of life, something that will be useful and beneficial and life giving.


Hilary Hendershott: Thank you. Your insights are just– I could tell there from the trenches, and I know that you wanted, you kind of give your final thoughts there. If I may, just pull us back to the documents portion of the conversation, just get really practical for people. I know you said document everything, so let’s just say, how many years of tax returns?


Karen Sparks: All right. So, when I’m doing a marital standard of living analysis, and I will explain that, a lot of jargon here, a marital standard of living analysis is done in cases where we are trying to solidify what the permanent alimony or spousal support amount is going to be for the receiving spouse. So, that report is normally done when there is some textual discussion about what’s going to be paid. One party is saying, this is what it should be according to the calculations. Another party is being like, I’m not paying that, whatever. So, I do this report.


So, in keeping with your question, I go back three to five years on all documentation when I do an MSOL. So, you want to make sure at minimum that you have three years of tax returns, to answer your question, right? Three years of financial statements. Now, this can get a little overwhelming depending on what the financial bucket looks like. So, sometimes, I edit this just a little bit if the volume is going to be voluminous, but I want to have as much history as possible. Why do I want to have the history? Because I want to see what’s going in, what’s coming out, what’s happening, what’s been the flow. How has the family lived? What has this look like? Are we carrying a lot of debt structure, right? Are we doing a lot of margin calls on stock accounts and things that you’re holding? And you’re creating a debt financed family in that way. Yeah, you’re going on vacation, you’re doing all these things, but how is that being financed, right?


Hilary Hendershott: It looks good, but…


Karen Sparks: So, again, we’re looking at all of the intellectual assets. We’re looking at all the apps, how much money is being spent. Money is being transmitted through a lot of ways now. So, we want to capture as much of that as we possibly can. So, when I’m talking about documentation, I’m talking about tangible and intangible, all of it. All of it, Bitcoin, all of the things. So, that’s what I’m referring to.


Hilary Hendershott: Okay. And separately held businesses probably need an official estimate, right? You need someone to come in and say this business is worth this much.


Karen Sparks: So, there’s a couple things with the business. So, one of the things is that, first of all, we need to determine whether both parties work in that business. Sometimes, they’re a family business, right? So, we’re going to have to apply a methodology to find out how the community, and we do call it the community, how the community is going to be compensated for this business, particularly if one person is going to keep it going and the other person is going to step, and they’re not going to continue to do this post divorce. So, that’s the first thing.


Secondly, unless it’s a service-related business, those are a little bit easier to kind of value without a huge effort. But most companies are going to need a business valuation, so I want to set the expectation for that. You want to know in real time what is that business actually worth. We don’t want to start guessing about it. We don’t want to start using paperwork from three years ago. We want to know right now that we’re in this crisis, what is the business worth? That is key. Particularly if the non-resource spouse didn’t have a whole lot to say and what was going on with it and doesn’t even know how the business is being operated. We need to have all this stuff out here and have all of that.


And for documentation, I’m looking at all of the LLC paperwork. I’m looking at the business tax returns, right? I’m looking at the K-1. And I’m cross-referencing those with the tax return to make sure that things are going the way that they do. So, it is a very thorough approach that I personally think needs to happen when there’s a lot at stake. Like you said here, there’s a lot at stake. There is a lot at stake. And we need to make sure that we’re dealing with all the pieces on the table.


Hilary Hendershott: There is a lot at stake. And I do want to reiterate, I said something at the beginning and it’s not offhand. I can’t tell you the kinds of things I’ve seen come across from attorneys who are not trained in financial analysis. And to you, I think this person is putting numbers on paper and they’re not qualified to do it and they’re costing one party in this community a lot of money. So, I want to reiterate the importance of someone like you. Karen, what is the right type of financial ecosystem that a couple could or should have to work with someone like you?


Karen Sparks: Well, quite frankly, if you own any type of real property, if you own a business, if both of you are employed, if you have minor children, those are the families, and up from there, of course, are the families that I need to be working with. Those who may have a smaller ecosystem, maybe it’s just the two of you, maybe there aren’t any kids, maybe there isn’t a lot to really talk about, most county courthouses have facilities for self-help that will really take you through that. So, that’s not going to be a big situation. You can really get some good, good help there if your asset level is all. But when you start owning property, when you start to have any equity benefits, when you start having anything that looks like that, that’s when someone like me needs to kind of get involved in the conversation because there’s going to be things that we’re going to need to figure out and do.


Hilary Hendershott: Okay. And Karen, we’re going to put the links to reach you in the show notes below this episode. But for those of my listeners who are just hearing you today, what is the best place on the internet to reach you and everything you do?


Karen Sparks: All right. So, first of all, you can go to my website, which is www.DivorceFinancialStrategists.com. You can certainly reach me through that vehicle. You can also reach me on LinkedIn. I am on LinkedIn. So, look for Karen Sparks on LinkedIn.


Hilary Hendershott: Well, that is lovely. I want to appreciate your time here. Again, I’m just clear, I’m in the presence of someone who knows exactly what she’s doing. So, thank you for contributing to this audience. And thank you for your time.


Karen Sparks: Oh, it was my pleasure. Happy to be here always, Hilary. You know that. Thank you.


Hendershott Wealth Management, LLC and Love, your Money do not make specific investment recommendations on Love, your Money or in any public media. Any specific mentions of funds or investments are strictly for illustrative purposes only and should not be taken as investment advice or acted upon by individual investors. The opinions expressed in this episode are those of Hilary Hendershott, CFP®, MBA.


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