Best Texas Estate Settlement Guide When MERP Notice Arrives and a Surviving Spouse Needs to Protect the Home

If a Texas Medicaid recipient over 55 has died and you have received a Notice of Intent to File a Claim from the Texas Medicaid Estate Recovery Program (MERP), the most important thing to know immediately is this: the presence of a surviving spouse — any age — triggers an automatic and complete waiver of the MERP claim. The program cannot recover anything from the estate as long as the surviving spouse is alive. If you are the surviving spouse, you do not need to pay MERP, respond to HMS's notice with payment, or hire an attorney to fight the claim. You need to respond with proof of your existence.

That is the lead. Now here is the full picture, because the other exemptions, the hardship waivers, and the interaction between MERP and Texas probate tools are where families make expensive mistakes.

What MERP Is and What It Can Actually Do

The Texas Medicaid Estate Recovery Program is a federally mandated program administered by Texas Health and Human Services Commission (HHSC) through a third-party contractor, Health Management Systems, Inc. (HMS). MERP is authorized to seek reimbursement from the probate estate of a Medicaid recipient who:

• Was 55 years of age or older when they received Medicaid benefits
• Received specific services: nursing facility care, intermediate care for intellectual disabilities, or community attendant services

MERP does not file a lien on the home during the recipient's lifetime. It does not attach a lien automatically upon death. Instead, MERP enters the probate process as a Class 7 unsecured creditor under Texas Estates Code Section 355.102 — the lowest priority class in the claims hierarchy. Funeral expenses, the costs of the final illness, estate administration expenses, and secured debts all rank ahead of MERP. The family allowance and exempt property set-asides come before MERP as well.

Within 30 days of receiving notification of the death, HMS sends a Notice of Intent to File a Claim to the estate representative or family members. That notice details the amount claimed and the dates of recoverable services. Do not interpret the notice as a bill you must immediately pay.

Who This Is For

This guide is the right resource if you are:

• A surviving spouse who received a MERP notice and needs to understand that the claim is fully waived while you are alive
• An adult child of a Medicaid recipient who needs to evaluate whether the absolute exemptions or hardship waivers eliminate the MERP claim
• An executor managing an estate where a MERP claim is pending and you need to understand how MERP interacts with Independent Administration, the Muniment of Title, or the Small Estate Affidavit
• A family member trying to determine whether a Lady Bird Deed or Transfer on Death Deed in place before the recipient's death keeps the home out of MERP's reach entirely

Who This Is NOT For

A settlement guide focused on MERP exemptions and estate administration is not what you need if:

• The MERP claim is being contested on the basis that the services billed were not covered — that is a Medicaid billing dispute requiring an elder law attorney
• The estate is being administered under Dependent Administration with an insolvent estate and multiple competing creditors — that level of complexity requires legal representation throughout
• You need to challenge MERP in an administrative hearing based on procedural grounds — that requires a licensed attorney familiar with Texas HHSC administrative procedures

The Absolute Exemptions: When MERP Cannot Recover Anything

Texas law mandates that MERP waive its claim entirely — no recovery, no partial recovery — if any of the following conditions exist at the time the estate is being settled:

1. Surviving spouse: A surviving spouse of any age is alive. This is the most common exemption and the most powerful one. MERP cannot recover from the estate at all while the surviving spouse lives.

2. Child under 21: A child of the deceased under the age of 21 is alive.

3. Blind or disabled child: A child of any age who is blind or permanently and totally disabled under Social Security definitions is alive.

4. Minimum estate value: The total value of the recoverable estate is $10,000 or less.

5. Minimum Medicaid amount: The total amount of recoverable Medicaid costs is $3,000 or less.

6. Resident caregiver: An unmarried adult child lived full-time in the deceased's home for at least one continuous year immediately prior to the death and provided care that delayed the deceased's institutionalization.

If any of these applies, MERP's claim is completely barred. Documenting the applicable exemption and responding to HMS in writing — with supporting documentation — is typically all that is required.

The Hardship Waivers: When Recovery Would Be Unjust

Even if no absolute exemption applies, Texas provides a set of hardship waivers that can reduce or eliminate MERP recovery based on financial impact:

Homestead hardship waiver: If the home is valued under $100,000 and the inheriting heirs have a gross family income below specific thresholds — approximately $46,950 for a single person or $63,450 for a family of two as of 2025 — the state will waive the claim against the homestead. These income thresholds adjust annually and are tied to the federal poverty level guidelines.

Property maintenance deductions: Heirs can deduct from the MERP claim the costs of maintaining the home while the recipient was institutionalized — real estate taxes, utility bills, insurance premiums, and documented repair costs.

Personal care deductions: Heirs who provided personal attendant care that delayed the deceased's placement in a nursing facility can deduct the value of those services from the MERP claim.

Hardship waiver requests are submitted directly to HMS at P.O. Box 166889, Irving, Texas 75016, or to HHSC's MERP program at P.O. Box 13247, Austin, Texas 78711. Documentation requirements are strict: income documentation, property value evidence, and receipts for maintenance costs and caregiving hours provided.

How Lady Bird Deeds and TODDs Affect MERP

MERP can only recover from the probate estate — assets that pass through the probate process. Assets that transfer outside of probate are generally beyond MERP's reach.

A Lady Bird Deed (enhanced life estate deed) keeps the homestead out of the probate estate by allowing the owner to retain full control and use of the property during their lifetime while naming a beneficiary who takes automatic ownership at death without probate. Because the property never enters the probate estate, MERP has no legal basis to file a claim against it. This is the most effective planning tool for protecting the homestead from MERP in Texas.

A Transfer on Death Deed (TODD) works similarly — it transfers real property to a named beneficiary automatically at death without probate. However, Texas Estates Code Section 114.106 provides a significant caveat: property transferred via a TODD is still liable for the deceased's unsecured creditor claims for up to two years after the date of death. MERP is an unsecured creditor. If a Lady Bird Deed is unavailable (because it was not executed before death) and the family transferred property via a TODD instead, MERP may still pursue recovery against the property within that two-year window.

If neither a Lady Bird Deed nor a TODD was in place before death, and the home will pass through the probate estate, the family must address MERP within the probate process — either by establishing an absolute exemption, qualifying for a hardship waiver, or paying the claim before distributing estate assets.

MERP and Probate Bypass Tools in Texas

When families attempt to transfer the home via a Muniment of Title or a Small Estate Affidavit, title insurance companies routinely require MERP clearance before they will insure the transfer. This means that even if your estate technically qualifies for a probate bypass, you will need to:

1. Notify MERP of the death (required within 30 days of opening any estate proceeding)
2. Obtain either a formal MERP certification that no recovery claim exists, or a release of the claim based on an applicable exemption or waiver
3. Provide the MERP release documentation to the title company to clear the property for sale or transfer

The MERP clearance process adds time to a Muniment of Title or Small Estate Affidavit closing. Build this step into your timeline from the start rather than encountering it at a closing table.

Comparison: How to Handle MERP by Situation

Tradeoffs

The tradeoff for families in this situation is between time and cost. Establishing an absolute exemption — particularly the surviving spouse exemption — is fast, costs nothing, and requires only documentation. Pursuing a hardship waiver requires assembling income documentation and property appraisals, which takes time but avoids any payment.

The risk of not engaging with MERP's notice at all is that the estate distributes assets before the claim is resolved. Even if the surviving spouse exemption applies, failing to formally respond can delay estate closing and create title problems when the property is eventually sold.

The risk of engaging a full-service elder law attorney when the surviving spouse exemption clearly applies is unnecessary cost — many families in this situation pay thousands in legal fees for a process that amounts to sending HMS a letter with a marriage certificate.

Frequently Asked Questions

I received a MERP notice. Does that mean the state will take the house? Not necessarily, and not automatically. MERP issues notices as a standard procedural step. Whether recovery actually happens depends on the applicable exemptions and waivers. If a surviving spouse is alive, MERP cannot recover anything from the estate while the spouse lives. If there is no surviving spouse or qualifying child, evaluate the hardship waiver before assuming the claim must be paid.

Who sends the MERP notice and where do I respond? The notice comes from HMS (Health Management Systems, Inc.), MERP's third-party contractor. Respond in writing to HMS at P.O. Box 166889, Irving, Texas 75016. If the notice relates to the HHSC program directly, you can also contact MERP at P.O. Box 13247, Austin, Texas 78711.

Does MERP put a lien on the house when someone goes into a nursing home? No. Texas MERP does not place a lien on the home during the Medicaid recipient's lifetime. The claim arises after death and enters the probate process as an unsecured creditor claim. Pre-death planning tools — particularly a Lady Bird Deed — can prevent the home from entering the probate estate and thereby eliminate MERP's access to it entirely.

Can I distribute the estate before resolving the MERP claim? Not safely. If MERP has a valid claim (no exemption applies, no waiver approved) and you distribute estate assets to heirs before the claim is resolved, you as executor may be personally liable for the claim amount. Texas Estates Code places MERP as a Class 7 creditor, meaning it ranks below family allowances, funeral costs, and secured debts — but it still must be paid before distribution to heirs if no exemption or waiver applies.

What is the income limit for the MERP homestead hardship waiver in Texas? For 2025, the income limit for a single heir is approximately $46,950 gross annual income. For a household of two, the limit is approximately $63,450. These amounts adjust annually based on the federal poverty level. The waiver also requires the home to be valued under $100,000. Both conditions must be met simultaneously.

The Texas Estate Settlement Guide includes a dedicated MERP chapter covering the absolute exemptions, hardship waiver criteria, the interaction between MERP and Texas probate bypass tools, and how to respond to HMS's notice in a way that stops the clock on the recovery process — organized as part of the full estate settlement roadmap so you know where MERP fits in the sequence of administration steps.

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