Texas MERP Exemptions: When Medicaid Cannot Claim Your Parent's Home

When a parent or relative who received Medicaid long-term care benefits dies in Texas, one of the first pieces of mail the family receives can be a formal notice from Health Management Systems, Inc. (HMS) — the state's MERP contractor — stating that Texas intends to file a claim against the estate to recover what Medicaid paid.

This notice causes understandable panic. Families assume the homestead is about to be taken. In many cases, that assumption is wrong — because Texas law provides broad statutory exemptions that completely block MERP recovery under specific conditions.

What MERP Can and Cannot Recover

The Texas Medicaid Estate Recovery Program (MERP), administered by the Texas Health and Human Services Commission (HHSC) under contract with HMS, is authorized to seek recovery of specific Medicaid expenditures from the estates of deceased recipients aged 55 or older who received:

• Nursing facility services
• Intermediate care facility services (for individuals with intellectual disabilities)
• Community attendant services through STAR+PLUS or related programs

MERP's claim enters the probate estate as a Class 7 unsecured creditor claim under Texas Estates Code Section 355.102. This is the lowest priority creditor class. Funeral expenses, the family allowance, estate administration costs, secured debts (like a mortgage), and taxes are all paid before MERP receives a single dollar. If the estate's assets are exhausted by higher-priority claims, MERP gets nothing.

Critical clarification: MERP does not place a lien on the home during the recipient's lifetime. There is no automatic lien at death. MERP enters the probate process as a creditor — a creditor that must yield to every other class of claim first.

The Six Absolute Exemptions

Texas law requires MERP to completely abandon its claim if any of the following conditions exist:

1. A surviving spouse is alive.

If the deceased's spouse is living at the time the claim would be filed, MERP cannot collect anything from the estate. The exemption remains in effect for as long as the surviving spouse is alive. MERP may reassert its claim after the surviving spouse's death, but only against whatever assets remain in the estate at that point.

2. A child under age 21 survives.

If the deceased has a surviving child who is under 21 years old, MERP cannot collect.

3. A blind or permanently disabled child survives.

If the deceased has a surviving child of any age who is blind or permanently and totally disabled under Social Security Administration definitions, MERP cannot collect.

4. The total recoverable estate is $10,000 or less.

If the total value of estate assets subject to MERP recovery is $10,000 or less, MERP will not pursue a claim — the administrative cost of recovery exceeds the benefit.

5. Total recoverable Medicaid costs are $3,000 or less.

If the total amount Medicaid paid for the qualifying services is $3,000 or less, MERP will not pursue a claim.

6. A resident caregiver adult child.

If an unmarried adult child of the deceased lived in the home as their primary residence for at least one full continuous year immediately before the deceased moved to a care facility, and the child continues to live there, MERP will not assert a claim against the homestead.

The Hardship Waiver: Low-Income Heirs

Even when an absolute exemption does not apply, MERP provides a hardship waiver for the homestead when two conditions are met simultaneously:

The property must be valued under $100,000. MERP calculates this against the home's fair market value. Properties worth more than $100,000 do not qualify for this specific hardship waiver.

Inheriting heirs must have low income. In 2025, the income thresholds were:

• A single heir: annual gross income of $46,950 or less
• A household of two: $63,450 or less (approximately)

These thresholds adjust annually with federal poverty level guidelines. The hardship waiver uses income limits tied to 300% of the federal poverty level.

If both conditions are met — home worth under $100,000, and heirs with income below the threshold — MERP will waive the entire claim against the homestead.

Other Hardship Deductions

Even without the hardship waiver, heirs can reduce the MERP claim amount by deducting certain expenses:

• Home maintenance costs paid while the recipient was in the nursing facility: Real estate taxes, utility bills, insurance premiums, and roof or structural repairs paid by family members out of pocket during the period of institutionalization are deductible from the claim amount.
• Personal attendant care provided before institutionalization: If a family member provided regular personal care to the Medicaid recipient at home, thereby delaying or preventing nursing home admission, the value of that care can be deducted from the claim.

These deductions require documentation. Keep receipts, bank records, and written records of any care provided.

The MERP Process: What Happens After the Notice

Within 30 days of receiving notification of the recipient's death, HMS sends a Notice of Intent to File a Claim to the estate representative or family members at the address on file. The notice specifies the amount of the claim and the qualifying service dates.

The estate has the right to dispute the claim, assert exemptions, or request a hardship waiver. Communications should be directed to:

• HMS (MERP contractor): P.O. Box 166889, Irving, Texas 75016
• MERP Program (HHSC): P.O. Box 13247, Austin, Texas 78711

If you are asserting an exemption or waiver, put it in writing and send it via certified mail with tracking. Document everything.

MERP and Non-Probate Transfers

MERP can only recover from the probate estate — assets that pass through the estate administration process. Assets that transfer outside probate are generally protected from MERP:

• Payable-on-death bank accounts transfer directly to the named beneficiary and do not enter the probate estate.
• Life insurance with a living named beneficiary passes outside probate.
• A properly executed Transfer on Death Deed (TODD) transfers real estate directly to the named beneficiary without going through the estate. Under Texas law, property transferred by TODD does not become part of the probate estate — and therefore is not subject to MERP recovery as a probate creditor.

This is why estate planning that includes TODDs, beneficiary designations, and community property survivorship agreements can significantly reduce MERP exposure for families who plan ahead.

Part of a Larger Settlement Process

Addressing MERP is one step in the broader Texas estate settlement process. The Texas Estate Settlement Guide at /us/texas/estate-settlement/ covers how MERP interacts with other aspects of estate settlement — including when to request a clearance letter before transferring title through a Muniment of Title or Small Estate Affidavit, how to assert hardship waivers in writing, and the creditor priority rules that govern whether MERP gets paid at all.

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