During the divorce process and after the agreement is signed, take special care in dividing retirement assets, crafting a new estate plan and revising a financial plan. If you make mistakes, you can place yourself at financial risk.

Change Your Estate Documents
Before the divorce is final, you should cancel any financial or health-care powers of attorney you gave your spouse. "The only way to revoke a power of attorney is to destroy the originals, or notify the institutions in possession of such powers that they have been revoked," says Gary Botwinick, an estate-planning lawyer in Denville, N.J. Otherwise, your former spouse or the spouse you're divorcing could still make life-and-death decisions on your behalf and gain access to your money.

Once the divorce is final and the assets divided, make sure you designate new beneficiaries for IRAs, workplace retirement plans, annuities and life insurance. Note that a new will won't eliminate an ex-spouse's claim on some assets. Suppose the divorce settlement entitles a wife to keep her own IRA. If her husband remains the designated beneficiary, he will get the money even if her new will directs that the IRA go to her son.

Also, it's not a good idea for older couples who are breaking up to select their grown children to act as their designees in living trusts, health-care proxies and powers of attorney.

"The children, even though they are adults, often take the divorce really hard and too often take sides or have issues," says Martin Shenkman, an estate-planning lawyer in Teaneck, N.J. "What we've done many times is name friends or advisers until the situation calms down, and then change the documents back to the children."

Take Care in Dividing Retirement Plans
Ed Slott, author of Your Complete Retirement Planning Road Map (Ballantine, $26), recalls a case where a divorce decree specified that the wife would receive $800,000 in an IRA, which was half of its value. Before the divorce was final, the IRA plummeted to $1.2 million. Because the wording entitled the woman to $800,000, the ex-husband got just $400,000. If the goal was to split the IRA in half, the agreement should have dictated that each party would receive 50% of the account.

When splitting an IRA, make sure to move the money directly from the account to another IRA. If the financial institution mails you a check, you have 60 days to get the money into an IRA. The handoff is often botched, which will trigger income taxes on the full amount.

If you receive money from a 401(k), it's best to move the assets to an IRA. As with the IRA, move the money directly to the new custodian. Try not to tap these accounts before retirement. "It's one of the things that scares me -- seeing people scrambling to get this cash," says Sue Hansen, a divorce lawyer at Hansen & Hildebrand, in Milwaukee.

Develop a Financial Strategy
If the couple sells the family home while they're still married, they can enjoy a profit of up to $500,000 without paying capital-gains taxes. If one spouse, however, receives the house in the divorce settlement and later sells it, he or she will face taxes on any profit that exceeds $250,000. If the wife, for instance, wants to remain in the home, any future tax hit should be considered when dividing up the assets.

Once you split up the household assets, you should hire a financial planner. "Many people heave a sigh of relief when they are done with the divorce, but their financial planning is just beginning," says Hansen, the divorce lawyer. "You need to examine the assets you receive and decide whether they are appropriate for you now and in the future."

Without a spouse, for example, an individual may want to avoid risk by investing the smaller nest egg more conservatively. Another might want to add stocks to the ex-spouse's bond-rich portfolio.

Hansen recalls one client whose stockbroker had arbitrarily split the couple's $300,000 stock portfolio down the middle. But some of the stocks had gained considerably, and the person who held them would owe sizable capital-gains taxes. Other stocks wouldn't trigger that added cost.

Your Social Security income is important, too, in developing a financial plan. If you're the lower-earning spouse, you must be married at least ten years if you want to choose your ex-spouse's Social Security benefit rather than the benefit based on your own work record. If you choose spousal benefits, you will receive as much as half of your ex's benefit -- the same amount as if you had remained married.

If you remarry, you cannot continue collecting benefits on your former spouse's record. But if you divorce that second spouse after at least ten years of marriage, you can claim a portion of the benefits of the ex-spouse who has generated the larger amount. The Social Security Administration can tell you which ex-spouse will generate the fattest checks.

Consider Health-Insurance Needs
A spouse who depends on an ex's workplace insurance is entitled to buy three years of coverage through COBRA if the employer offers it. But if you can afford your own insurance, it's often best to skip the temporary coverage, says Cinda Jones, a certified financial planner at Divorce Financial Solutions in San Diego. If you become seriously ill while on COBRA, she says, you may not be able to find an affordable plan when COBRA coverage expires.

Exorbitant health-insurance costs have prompted some couples to postpone divorce. They may obtain a legal separation and divide all the property, but remain married so the uninsurable person can stay on a company plan, Jones says. This may not be feasible if one partner wants to remarry. But, Jones adds, "if it's a short amount of time before the person with health problems will be on Medicare or can get a job with health insurance, then it's worth discussing."