Legal Question in Real Estate Law in California

Re: property protection

California does not allow contractors to operate as LLCs. A corporation can be used; exchanging an individual license for a corporate license is not too difficult, but requires an application and a new bond. You will also need to obtain a new taxpayer ID, new stationery and business cards, etc. and notify your landlord, bank, suppliers and customers about your change.

Other than avoiding negligence in the first place, liability insurance is the best way to protect yourself against the consequences of suits.

Placing property into any kind of revocable trust is ineffective to shield it from creditors - trusts are transparent and a judgment creditor can foreclose on your trust's assets as readily as on your own.

Transferring property to a spouse is risky because such a transfer is likely to be challenged as fraudulent. Several factors are weighed to determine whether a transfer of property between related persons was done fraudulently to protect family assets from creditors or potential creditors, including whether a realistic price was paid and in the case of a house, whether the transferor continues to live there or not. A creditor is likely to find out about transfers between spouses by checking the public records, and if a questionable transfer appears on the records, the creditor can ask the court to set it aside and subject the property to the claim. Both participants in a fraudulent transfer (transferor and transferee) are considered legally to be equally at fault.

Finally, your house probably ought to be in your joint living trust anyway, even if not for the reason of shelter from lawsuit liability.

Re: property protection

A better alternative may be to form a limited liability company. This would encapsulate liability into the company (like a corporation) so that your personal asset risk is minimalized and an LLC can be taxed like a partnership (flow through). California now allows single manager LLCs. Talk to your CPA and an attorney about this option and great job with thinking ahead!

Re: property protection

The previous answer is incorrect. Contractors in California cannot operate as a limited liability company. However, your husband can operate as a corporation. He should still see a CPA to see if he should form a C corporation or an S corporation.

Transferring the trust will no keep creditors from getting to it and transferring the property to your name may have unintended tax consequences. You husband needs to have adequate insurance. You should be aware that any unpaid judgment form a construction contract can result in a suspended license, so asset protection might be the least of your worries.

Re: property protection

A Living Trust will not shield assets. Proper insurance is the best way to protect assets. That aside, a post nuptial agreement and careful planning of assets might help.