Legal Question in Real Estate Law in California
The owner of a house puts it under a trust. The house is rented through a corporation, which handles all the rental business � this corporation is also owned by the owner of the house/trust. There is a contract between the corporation and the trust, so the corporation compensates the trust for the rights to rent the house. Part of the contract is that the owner of the house/trust is relocated, because it makes more sense financially for him to rent his property and live in a cheaper place.
Should the corporation pay for owner�s housing/relocation, or should the trust pay for it out of the proceeds it makes from the corporation managing the rentals? Wouldn�t be piercing the corporate veil if the corporation paid for the owner�s relocation since the owner of the trust/house also owns such corporation? What would offer the owner a better legal protection if, let�s say, someone sued him?
2 Answers from Attorneys
You need to consult the attorney(s) who set up the corporation and trust. The structure they set up will determine the answer to the question, though a tax accountant should probably be consulted as well.
If the trust is revocable and the corporation is a one-stockholder S corporation, the whole setup is likely to be disregarded by the IRS and by judges in evaluating creditors claims.
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