If I let someone work in my garage and use my tools, but hurts himself, I am guessing I would be liable? Even if he is not employed by me and I am just letting him use my tools as a favour? What about if I make him sign I letter stating I cannot be held liable?

Soon I will be taking very early retirement at 40, but from then on have to really guard what little capital I have - certainly do not want "being a nice guy" to bite me in the ass...