Legal Question in Wills and Trusts in California

Sure it is legal. Does it provide sound asset shield? NO. It doesn't provide any asset shield of any kind at all unless the trust is an iron clad, completely irrevocable trust that absolutely prohibits distribution of the assets back to you under any circumstances. Basically if you still own any interest in anything, have the power to control what is done with it, or have any rights to it, it can be reached to satisfy a judgment or court order.

You say all your assets are in the trust, so what does the LLC own? If it owns anything, your shares of the LLC can be seized and the LLC liquidated and the money paid to your creditors. Is the trust irrevocable? Spendthrift? No "safety valve" provision allowing the trustee to invade the corpus of the trust in emergencies? Then MAYBE the assets there are safe, but not if you put community assets into it without your spouse's informed written consent to convert them to separate property. Not only would a divorce lawyer have a field day if you put community assets in there without proper transmutation, judgment creditors will run right up that flaw like rats up a dockline to get at everything you put in the trust.

The bottom line: We have this huge expensive thing called a civil justice system, with thousands of laws regarding civil and Family liability, and hundreds of thousands of judges and other court employees, scores of courthouses with thousands of court rooms, clerks offices, jury rooms, etc., all for the sole purpose of determining whether people have liability to one another and to collecting what is owed if liability is found. It completely astounds me there are people who think that just by filling out a few forms and changing a few title records, they can circumvent all that.

Do YOU really think the system is that stupid and it's all that simple? REALLY?

So be realistic. You want to avoid angry spouses taking you to the cleaners? Spend the money on a decent Family Law attorney for a pre-nup, or a post-nup, and to document agreements regarding the community property consequences of any major financial activities during the marriage.

And you want to protect assets from creditor or liability judgments? Well on the creditor side, it's simple -- pay your bills. You have no business accumulating assets if you can't pay your just debts. As for liability? Buy insurance. Think about it. Would insurance companies even exist if they didn't provide a better alternative to asset protection schemes?