While divorce creates many emotional and financial challenges, it does offer you the chance to start with a clean slate when writing the next phase of your financial life. Knowing your rights and obligations can help make divorce less expensive and reduce the devastating impact to you and any children involved.

Debt: Find out what you owe
If your spouse has always managed the finances or is an out-of-control spender, you may not have a clue as to the true amount of your debt. An easy way to find out what is owed by you and your spouse is to obtain a credit report from all three credit reporting agencies: Equifax, Experian and TransUnion.

Credit: Cancel joint accounts, open individual ones
If you are separated and know that divorce is inevitable, cancel all joint accounts and open new ones in your name only. You should notify your spouse, in writing, of your intent to close accounts prior to doing so. If you have no income, a secured credit card backed by a deposit account may be the answer. Close all unused credit accounts and notify creditors of your change in marital status.

Taxes and Assets: Understand tax returns, investments and policies
Maintain a file of basic financial information, including income tax returns for the last five years; current copies of retirement, brokerage and bank account statements; copies of all insurance policies, wills, trusts, deeds or lease agreements on your home, birth certificates and your marriage license. Don't forget to include all account numbers and beneficiary information where applicable.

The potential tax pitfalls associated with divorce are abundant. For example, if you receive alimony, you must pay taxes on that money but it may be tax-deductible to your ex-spouse on that year's tax filing. Be sure to work with a qualified tax preparer when your status changes. Also, consult a financial advisor prior to the divorce settlement to help assess the real value of your assets and financial tradeoffs like losing your spouse's health insurance and other employer benefits.

Pension Division: You may be entitled to a portion of your spouse's qualified plan
In the division of marital property, another asset to consider is a spouse's employer-sponsored qualified plan. In order to divide such assets — pension, profit sharing or 401(k) plans — a Qualified Domestic Relationship Order (QDRO) must be entered by the court and signed by a judge (not all employer-sponsored retirement plans will qualify for this method). A QDRO provides a safeguard for the ex-spouse that prevents the employee spouse from squandering the ex-spouse's share. It can also ensure that each spouse becomes responsible for his or her share of the income taxes due on their portion of this money.

Usually, a QDRO is used to transfer money from the employee spouse's plan to the ex-spouse's IRA. However, the tax code also allows money transferred under a QDRO to be pulled into an ex-spouse's IRA without being subject to the usual 10% tax penalty. If a distribution is made, the money can be used for immediate needs like a down payment on a house or paying legal fees, but it cannot later be transferred into their IRA (except for the annual IRA contribution limit). Consult with your tax advisor regarding specific tax issues.

Divorce Settlement: Don't overlook housekeeping details
Once a settlement has been reached, update your will, change names on house deeds, investments, car titles and other items included on your assets list. It might be a good idea to check your credit report again to be sure your ex hasn't incurred debts in your name since the proceedings began.

When your divorce is final and assets have been legally divided, it's important to carefully manage proceeds, replace any lost insurance coverage and invest for retirement. Unless the court has ordered you not to do so, change beneficiary information on investments, retirement accounts, insurance policies and other applicable holdings that designate your former spouse. Taking charge of your finances is the most important step you can take to help ensure your long-term security and that of your children.

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*The initial consultation provides an overview of financial concepts. You will not receive written analysis and/or recommendations.

This information is provided for informational purposes only. The information is intended to be generic in nature and should not be applied or relied upon in any particular situation without the advice of your tax, legal and/or your financial advisor. The views expressed may not be suitable for every situation.

Ameriprise Financial Services, Inc. Member FINRA.