Divorcing? 15 costly mistakes

By divorce360.com

When you're going through the pain and emotional battles of a divorce, it's easy to overlook financial issues that can hurt you long after any hard feelings have healed. Here are 15 critical financial mistakes that you can't afford during a breakup:

Becoming a financial victim. If you suspect your spouse is planning a divorce, now's the time to make copies of all important financial papers, from property and investment records to bank statements, credit card bills and tax returns. Worried that your estranged spouse may liquidate or retitle marital assets? Notify the holder in writing and get a court restraining order. Watch out for cash in joint checking or brokerage accounts, and protect the cash value of your life insurance.

Not considering mediation. If assets are moderate, joint custody is workable and your spouse is agreeable to a fair settlement, mediation will save thousands of dollars in legal fees and emotional aggravation, and provide more flexibility than an adversarial legal process. Mediation won't work if one spouse is hiding assets or income, or is unwilling to consider the needs of the other.

• Talk back: How has divorce affected your finances?

Hiring a combative lawyer as punishment. This is a bad idea for two reasons. First, except in extremely egregious cases, divorce settlements are determined by equitable-distribution laws, and courts will not punish your ex-spouse financially for being a bad person. Second, your attorney assumes carte blanche to increase hours spent on your case. High divorce costs mean less money left over for living. Treat divorce as a business arrangement, and get your revenge by living well post-divorce.

Failing to recognize your enemy: the Internal Revenue Service. Work with a divorce financial planner or tax accountant to minimize the total taxes you and your ex will pay during separation and after divorce, and share the money you save. Don't forget that both parties are liable for taxes due as a result of audits on joint returns. Don't count on the innocent-spouse rule to protect you.

Not producing an accurate budget. Invariably, clients underestimate or omit expenses when they produce their initial budget for temporary maintenance, and then later on in the divorce process they complain about being unable to pay bills. Use a financial professional to help you produce an accurate and complete budget.

Not evaluating a divorce settlement on an after-tax basis. The bottom line is the share of marital assets you get after the tax man gets his. Say your spouse handles all the investments and offers to split them 50/50. Sound fair? I suggest you look at the value of your assets relative to your spouse's on an after-tax basis. Then decide if you like the deal.

Failing to use computer models to evaluate settlements. If you are trying to decide whether a divorce settlement is equitable and workable, you certainly want to know how you will be doing financially three, five or 10 years down the road. There are many interactive factors you must consider, including assets, incomes, budgets, maintenance and child support, taxes, retirement plans, investments and educational expenses. Specialized divorce computer models can produce comprehensive and realistic analyses of your post-divorce lifestyle.

Bringing an emotional attachment to assets. The marital residence, the pension you earned, a painting purchased during your marriage -- these assets bring an emotionally charged debate to divorce negotiations. The fact is many women can't afford the family home on their own. A house is an asset that has a low return on investment -- actually losing ground over the last couple of years -- and is a major cash expense (mortgage payments, taxes, maintenance and repairs, heat and electricity).

Continued: Your lawyer is not a therapist

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