Medicaid Estate Recovery in Texas: What Families Need to Know (Before It’s Too Late)

Understanding MERP and How to Protect What You’ve Built

By Cotton Phillips

Let’s start with a truth nobody likes to say out loud:

Medicaid long-term care is for people who are broke — and the rules are designed to make you exactly that.

Not illegally. Not maliciously. Just… structurally. If Medicaid is going to step in and pay for your nursing home or assisted living care, the State of Texas (and every other state) is required by federal law to try to recover those costs from your estate after you die.

That system is called MERP — Medicaid Estate Recovery Program.

And if you’re in West Texas or the Panhandle, you’ve either seen this happen to a neighbor… or you’re starting to feel that gut-level fear that it could happen to your family too.

Let’s break it down.

What Exactly Is MERP?

MERP is the State of Texas’ attempt to get reimbursed for Medicaid spending on:

• Nursing home care

• Assisted living through Medicaid programs

• Home- and community-based services (sometimes)

• Prescription drugs and medical care tied to long-term care

  
  

MERP kicks in after the Medicaid recipient dies. Texas can file a claim against the person’s estate to recover what Medicaid spent on their care.

Translation for normal humans: If Medicaid helped pay for Mom’s nursing home, the state may try to get the house after she passes.

Why Does MERP Exist?

Federal law requires every state to run an estate-recovery program.

The logic is:

• Medicaid is meant for the poor

• Long-term care is expensive

• Taxpayers shouldn’t foot 100% of the bill if the person leaves behind assets

• So the state tries to get reimbursed before those assets pass to the family

  
  

Texas didn’t invent MERP. Texas just enforces it — and sometimes aggressively.

When Does Texas Come After the Estate?

MERP applies only if:

1. The Medicaid recipient was 55 or older, and

2. They received long-term care services, and

3. They leave behind a probate estate.

   
   

This last part is the key: MERP only reaches assets that go through probate.

If you plan properly — Lady Bird Deeds, Transfer-on-Death Deeds, beneficiary designations, and properly titled assets — you can legally bypass probate and avoid MERP altogether.

What Assets Can MERP Recover?

Texas can pursue:

• The home (primary residence)

• Land

• Vehicles

• Bank accounts

• Mineral rights

• Anything else in probate

  
  

What MERP cannot touch:

• Life insurance with a named beneficiary

• IRAs with proper beneficiary designations

• Assets passed through Lady Bird or TOD deeds

• Assets inside certain trusts (if set up correctly)

• The homestead if exempt when passed to:

  
  

  A surviving spouse

  A disabled child

  A child under 21

  • 
    

But beware: these exemptions don’t magically apply.

Your paperwork has to be airtight.

How Texas Actually Collects

Texas hires a contractor that sends MERP claims to families. It feels cold and bureaucratic — because it is. Families often get a letter demanding reimbursement for tens or hundreds of thousands of dollars.

However, MERP can be negotiated, reduced, or waived in situations like:

• Undue hardship

• Low-value estates

• Family caretaking situations

• No probate assets

• Estate worth less than $10,000

• Homes in rural areas with low-market value (common across West Texas)

  
  

The trick is knowing how to respond — and what not to disclose. Many people accidentally volunteer information that hurts them.

Why Most Families Get Blindsided

Because nobody tells them the truth early enough:

Once Medicaid is paying for care, you no longer get to decide how your estate passes. The state does. Unless you planned ahead.

Planning ahead isn’t expensive. Catching up is.

What You Can Do Before Medicaid

This is where Cotton Phillips Estate Services fits into the picture.

Our Deed & Beneficiary Service helps West Texas and Panhandle families:

• Coordinate property transfer options, such as Lady Bird Deeds or Transfer-on-Death Deeds, when appropriate

• Review and organize beneficiary designations on bank accounts, IRAs, and CDs

• Assist with transfer-on-death titling for vehicles where available

• Create a clear, compliant roadmap for how assets are intended to pass

• Reduce the likelihood of probate by aligning non-probate assets correctly

  
  

This planning work helps families understand how assets may move outside of probate and how that positioning can affect Medicaid Estate Recovery considerations.

This is the difference between:

• Your heirs inheriting the ranch house, or

• Texas sending you a bill the size of Midland

What If You’re Already in Nursing Care?

If your loved one is already in a facility and Medicaid is involved, you’re in the clawback window — the most dangerous stage.

At this point, you need Rapid Clawback Response: Organizing deeds, beneficiary changes, vehicle titles, and account corrections while remaining compliant with Medicaid rules.

Final Word: MERP Doesn’t Have to Take the Family Home

MERP feels scary because families don’t know the rules until it’s too late. With the right tools and the right paperwork, most West Texas families can avoid it entirely.

I’m here to help.

Cotton Phillips Estate Services — serving Amarillo, Lubbock, Midland, and all of West Texas.

Disclaimer – Not Legal or Financial Advice

Cotton Phillips Estate Services is not a law firm, and I am not an attorney. The services I provide — including assistance with filings, paperwork preparation, negotiations, guidance through administrative processes, and general organization of your estate or benefit-related matters — are only meant to help you understand your options and navigate available procedures.