Robert Garza thought the hard part was over.
His mother Dorothy, 79, had suffered a stroke in the spring of 2022. After a difficult few months trying to manage her care at home, it became clear that a nursing facility was the only safe option. Robert spent the better part of a year navigating the Medicaid application — gathering bank statements, documenting the transfer of her old car, making sure every dollar was accounted for — and finally, Dorothy was approved. He breathed a sigh of relief.
She passed away fourteen months later, peacefully, in a Collin County care facility. Robert began settling her modest estate: a three-bedroom house in McKinney, a checking account with $4,200, and a few personal belongings. He expected the process to take a few months.
Six months after Dorothy's death, a certified letter arrived. The return address: Texas Health and Human Services Commission, Medicaid Estate Recovery Program. The state was asserting a claim of $94,800 — every dollar it had paid for Dorothy's nursing home care.
Robert had never heard of the Medicaid Estate Recovery Program. He had no idea such a thing existed. Neither do most of the families who call our office after receiving one of these letters.
The Program Nobody Told You About
The Medicaid Estate Recovery Program — known as MERP — is one of the least understood aspects of long-term care planning in Texas. Families spend months fighting to qualify a loved one for Medicaid, breathe a sigh of relief when approval finally comes, and then, months or years after the person dies, receive a letter from a state contractor demanding repayment.
MERP is not a Texas invention. Federal law — specifically 42 U.S.C. § 1396p(b)(1) — requires every state that accepts federal Medicaid funding to operate an estate recovery program for long-term care costs. Texas has done so since March 1, 2005. Since 2006, the program has recovered more than $102 million from Texas estates. The highest single recovery on record was approximately $424,000 from a Travis County estate.
The state contracts with a private company, HMS, to identify and pursue these claims. HMS earns a contingency fee — roughly 12% of whatever it recovers — which creates a financial incentive to pursue claims aggressively. Investigative reporting has documented that HMS, in multiple verified cases, denied valid family exemptions that Texas was legally required to honor. The state was ultimately forced to refund more than $520,000 to families who had been wrongly denied.
How MERP Actually Works
Under Texas law and 1 Tex. Admin. Code § 373.205, MERP applies to Medicaid recipients who were 55 or older when they received long-term care services after March 1, 2005. The program seeks to recover what the state paid for: nursing facility care, home and community-based waiver services, and related hospital and prescription costs.
When a Medicaid recipient dies, HMS files a Class 7 probate claim under Texas Estates Code § 355.102 — typically within 70 days of receiving notice of the death. The claim is filed in county probate court and treated like any other debt of the estate, paid after mortgages and secured claims but before general unsecured creditors.
What can MERP reach? Assets that pass through the probate estate:
- Real property — including the family home
- Bank accounts without a payable-on-death designation
- Vehicles titled solely to the deceased
- Personal property with monetary value
What MERP cannot reach:
- Life insurance with a named beneficiary
- Bank accounts with a payable-on-death (POD) designation
- Joint accounts with right of survivorship
- Property that passes outside of probate by any legal mechanism
This distinction — probate estate versus non-probate transfers — is the core of almost every MERP planning strategy.
The Automatic Exemptions Most Families Don't Know Exist
MERP is not applied universally. Texas law provides several automatic exemptions — situations where the state will not file a claim at all:
- Surviving spouse: If the Medicaid recipient had a surviving spouse, no claim is filed during the spouse's lifetime.
- Minor child: If a child under 21 survives, no claim is filed.
- Disabled child: If a surviving child is blind or permanently and totally disabled under Social Security standards, the claim is waived.
- Caretaker child: An unmarried adult child who lived continuously in the homestead for at least one year before the parent's death and provided care that delayed institutionalization may qualify for a full exemption.
- Small estate: If the total estate value is $10,000 or less, or if total Medicaid costs were $3,000 or less, no claim is filed.
Beyond these automatic exemptions, Texas law also allows families to apply for a hardship waiver under 1 Tex. Admin. Code § 373.209. To qualify, heirs must submit a written request within 60 days of receiving the Notice of Intent to File a Claim. HMS must respond within 40 days. The most common hardship waiver applies to homesteads: if the property is worth less than $100,000 and the heirs' gross family income is below 300% of the federal poverty level (approximately $46,950 for a single person in 2025), the state will typically waive the claim on the home.
What Could Have Saved the Garza Family
Had Dorothy executed a Lady Bird Deed — also called an enhanced life estate deed — before she applied for Medicaid, her McKinney home would never have been part of her probate estate at all.
A Lady Bird Deed allows the homeowner to retain full control of the property during their lifetime — including the right to sell it, mortgage it, or revoke the deed entirely — while designating a beneficiary who receives the property automatically at death, entirely outside probate. Because the home passes outside the probate estate, MERP cannot touch it. Texas homestead tax exemptions are preserved throughout.
Texas Medicaid, through HHS administrative policy, recognizes the Lady Bird Deed as a valid non-countable transfer that does not trigger a penalty under the five-year look-back rules. This single document — typically less than two pages, properly drafted and recorded with the county — is often the most powerful elder law planning tool available to North Texas families. But it must be executed before the Medicaid application is filed, ideally years in advance.
A Practical MERP Planning Checklist
The Lady Bird Deed handles the home. But MERP can reach other probate assets too. A complete plan addresses each:
- Bank accounts: Add a payable-on-death (POD) designation to every account. This costs nothing and removes the account from the probate estate entirely.
- Investment accounts: Use transfer-on-death (TOD) designations the same way.
- Life insurance: Ensure every policy has a named beneficiary — not "the estate." A policy payable to the estate feeds directly into probate and becomes subject to MERP.
- Vehicles: Texas allows transfer-on-death designations on vehicle titles through TxDMV. Use them.
- Timing: Planning done five or more years before a Medicaid application is dramatically more flexible than planning done in a crisis. But even planning done during the Medicaid application process can reduce recovery exposure if executed correctly.
If You've Already Received a MERP Notice
If your family has received a Notice of Intent to File a Claim, the clock is running. You have 60 days to request a hardship waiver in writing. Missing this deadline is one of the most common — and most costly — mistakes families make.
An elder law attorney can review the claim, determine whether any automatic exemptions apply, prepare a hardship waiver application with supporting documentation, negotiate deductions for home maintenance expenses — property taxes, insurance, and repairs — that offset the recovery amount, and challenge improper or inflated claims. This is not a process to navigate alone.
The Lesson: Plan Before the Crisis
Robert Garza ultimately retained an elder law attorney after receiving the MERP notice. The attorney identified that Robert had lived with Dorothy during the year before her death and had provided substantial care — enough to qualify for the caretaker child exemption. The MERP claim on the home was waived entirely.
But not every family is that fortunate. And for most, the better outcome is to never receive that letter in the first place.
At WG Law, attorney Taylor Willingham has spent over a decade helping North Texas families plan for long-term care — not just surviving it, but protecting what they've built. With 10,000+ estate-planning clients served, 2,000+ probate cases handled, and five published books on estate planning and elder law, Taylor understands that Medicaid planning is not about giving up assets. It's about knowing the rules well enough to use them wisely.
If you have a parent approaching the age where long-term care may be on the horizon — or if you've already received a MERP notice and are unsure what to do — call us at 214-250-4407 or request a consultation. We serve families in McKinney, Southlake, Frisco, Plano, Allen, and across the greater DFW metroplex.
This article is for general informational purposes only and does not constitute legal advice. Texas Medicaid rules are complex and subject to change. Please consult a licensed Texas elder law attorney about your specific situation.