Intellectual property (IP) is a special type of asset that many people forget needs protection when they anticipate the possibility of long-term care or are starting to plan for Medicaid coverage. Cash, investments, real estate, and other assets that can generate income or be sold are countable assets under Medicaid law, and IP is also considered a countable asset.
For many individuals with a net worth of $2–5 million, IP isn’t just a valuable asset—it’s a type of invisible wealth. It doesn’t exist on a spreadsheet or show up on bank account statements. However, IP can hold enormous financial power. Because it’s easy to forget the monetary weight of intellectual property, it’s often undervalued by the rights owner. And this can create problems if they’re trying to qualify for Medicaid.
The skilled elder law and Medicaid planning lawyers at Landskind & Ricaforte Law Group, P.C. understand that advanced estate planning is critical, especially when you have IP. With the right legal strategy, you can protect your copyrights, patents, trademarks, and royalty income while still accessing the Medicaid benefits you may need for nursing home or in-home care. Here, we discuss how Medicaid views IP and how it’s treated, and what wealthy families with $2–5 million in assets need to know and should consider now.
What Does Medicaid Consider Intellectual Property?
IP refers to a category of property that includes intangible creations of the human mind. The primary question Medicaid asks is how much money that IP is worth or generates. If your IP is producing income or can be sold, it’s part of your estate. This property can include the following:
- Copyrights. If you receive income from movies, computer software, music, art, books, sculptures, website design, or other original works after you created them, Medicaid may count it as an asset, along with the generated income.
- Patents. Inventions, chemical formulas, or manufacturing processes that you’ve patented, particularly those that have been licensed or sold, with likely be seen by Medicaid as assets with value.
- Trademarks. If your brand name, logo, slogan, symbol, colors, or sounds identify your goods and services, the value will likely be counted by Medicaid.
- Royalties and licensing agreements. Ongoing payments from third parties are considered income streams, which may impact Medicaid eligibility thresholds.
- Trade secrets. Any confidential information you have, including recipes, algorithms, formulas, and/or internal methods that provide a competitive advantage, may be considered an asset by Medicaid.
Medicaid Penalties of Overlooking IP
Estate and Medicaid planners often overlook IP because it’s often intangible and not an asset that is always obvious or visible. So, when you submit a Medicaid application, it’s possible to forget or neglect to consider the value of these types of properties. However, if IP is appraised too late, it can suddenly become a liability. The state could require you to spend down or transfer that value to cover long-term care costs.
It's important to know that you can’t give away IP without incurring a Medicaid penalty. If you transfer IP to your children or a trust within five years of applying for Medicaid, it can trigger a penalty period. Medicaid’s “look-back” rule scrutinizes asset transfers and may delay your eligibility—costing you thousands of dollars in care expenses.
How to Protect Your IP Before You Need Medicaid
Planning ahead is the only way wealthy families can fully protect their IP. If you wait until you need care, your legal options are severely limited. Proactive families should work with an estate planning attorney who understands IP. Because not all Medicaid planning lawyers have experience with IP assets, you need someone who can:
- Identify and properly classify your IP. Some intellectual property may be exempt from Medicaid under specific conditions.
- Coordinate with IP valuation experts. Knowing the true market value of your copyrights or patents is essential for fair planning.
- Design trusts that protect both the asset and the income.
Legal Tools for Shielding IP
There are a variety of legal mechanisms that may allow you to retain control of or benefit from your IP without disqualifying yourself from Medicaid. These include the following:
Utilize an Irrevocable Trust
One of the most effective strategies is to place intellectual property into an irrevocable Medicaid asset protection trust (MAPT). Once you transfer the IP—ideally more than five years before applying for Medicaid—the property is no longer counted as part of your estate. A MAPT offers the following benefits:
- Continued income for beneficiaries
- Legal protection from Medicaid spend-down
- Preservation of creative legacy
Separate Your IP From Royalties
In some cases, separating the ownership of the intellectual property from the income it generates can allow for more strategic planning. You might:
- Assign IP to a trust but retain a license
- Redirect royalty income in ways that comply with Medicaid guidelines
Avoid These Mistakes With Your IP
If you own valuable IP, Medicaid planning mistakes can be costly. Here are some common errors and how to avoid them:
- Don’t wait for a crisis. The five-year look-back period means it’s important to get your plan in place at least five years before you apply to Medicaid. If you wait until a health crisis happens, it will limit your options. Plan ahead.
- Don’t depend on oral contracts. Always formalize IP transfers and licensing agreements. Medicaid won’t accept informal arrangements.
- Don’t assume your IP is valueless. Even a small royalty stream or a dormant copyright can be appraised as a valuable asset.
Protect Your Creativity and Your Medicaid Qualification
When you spend decades building a creative or scientific legacy, that work deserves protection. Your need for long-term care shouldn’t wipe out the financial gains of a lifetime of work.
With the right legal strategy, you can shield your intellectual property while ensuring access to Medicaid benefits. Incorporating intellectual property into your estate plan is essential for maximizing the value of your estate, protecting your legacy, and helping to ensure you won’t be penalized if you need long-term care benefits through Medicaid.
The elder law and estate planning attorneys at Landskind & Ricaforte Law Group, P.C. understand the unique nature of IP assets and why it’s important to have legal guidance about those assets long before you apply for Medicaid. When you hire our team, we value your IP, maintain proper documentation, and help ensure that your valuable IP assets benefit your heirs and preserve your legacy for future generations. This planning also ensures that your creative and innovative contributions continue to be recognized and respected.