Texas Medicaid Estate Recovery 2026: Will MERP Take the House?

After a Texas Medicaid recipient dies, the state can seek repayment from the estate for long-term care it paid for after age 55. Texas Medicaid runs that process through its Medicaid Estate Recovery Program (MERP), and Texas amended its MERP rules effective August 27, 2026. The new rules raise the dollar floors below which the state won't file a claim, give the state more time to file one, and enlarge the hardship protection for a family home. If you read about MERP before late August 2026, some of the figures you remember have changed, and so has the definition of the estate the state can reach.1

What Federal Law Requires, and What Texas Chooses

Estate recovery is not a Texas invention. Every state has to run one, because federal law (42 U.S.C. 1396p(b)) tells every Medicaid program to recover from the estates of people who were 55 or older when they received nursing facility services, home and community-based services, and related hospital and prescription drug care.1

Federal law sets the outer edges of what "estate" can mean. A state's definition has to include everything that counts as the estate under the state's probate law. At the state's option, it can go further and reach other property the person had an interest in at death, including property that passes to a survivor through joint tenancy, survivorship, a life estate, or a living trust.1

Federal law also limits what a state can add on top of the recovery it is required to make. A state that chooses to recover for other services under its Medicaid plan may not include the Medicare premiums, deductibles, and coinsurance that Medicaid paid for people enrolled in a Medicare Savings Program. That carve-out covers only the optional add-on, so it does not shield the long-term care costs that recovery is required to reach.1

Texas fills in the details in Chapter 373 of the Texas Administrative Code, the rules that govern every step of MERP. The state's Health and Human Services Commission adopted the amendments without changes to the text it proposed in March 2026, filed them on August 7, 2026, and made them effective August 27, 2026. Everything below describes the rules as amended.1

What Changed When Texas Rewrote Its Rules in August 2026

Many of the numbers that circulated about Texas estate recovery for years are now out of date. If you are working from an older guide, a letter from a few years ago, or advice a friend got for a parent who died earlier, check it against the current rules before you act on it.1

The last row matters most for planning, and it is covered in its own section below.1

What Texas Medicaid Estate Recovery Can Reach

Under the amended rules, the state may file a claim only when two things are both true: the person was 55 or older when the care was provided, and they began receiving covered long-term care services on or after March 1, 2005. Age is counted generously. Texas treats someone as 55 starting the first day of the month after the month they turn 55, so care received in the month of a 55th birthday falls before the line. Care received before that point is not recoverable.1

The covered categories are long-term care, not routine medical care. The rules now list them by program. MERP can seek repayment for:1

• Nursing facility services.
• Care in an Intermediate Care Facility for Individuals with an Intellectual Disability or Related Condition (ICF/IID).
• Long-term care services under these Medicaid programs: Home and Community-based Services (HCS), Community Attendant Services (CAS), Community Living Assistance and Support Services (CLASS), Community Based Alternatives (CBA), the Consolidated Waiver Program (CWP), Deaf-Blind with Multiple Disabilities (DBMD), Integrated Care Management (ICM), STAR+PLUS long-term care services, and Texas Home Living (TxHmL).
• The related costs of hospital and prescription drug services.

Routine medical care that is not one of these long-term care services is not on the list. The Medicare cost-sharing carve-out described above does not widen this list, because it limits only optional recovery and leaves long-term care costs recoverable.1

The $15,000 Threshold: When Texas Will Not File a Claim

Texas does not chase small estates. Its rules (1 TAC §373.215) say no claim will be filed unless it is cost-effective, and they define exactly when it is not. A claim is not cost-effective, and so will not be filed, if any one of these is true:1

• The value of the recoverable estate is $15,000 or less.1
• The recoverable amount of Medicaid costs is $5,000 or less.1
• The cost of selling the property would equal or exceed what the property is worth.1

These figures took effect August 27, 2026. Before that date the floors were $10,000 and $3,000, and those are the figures older guides still quote. A loved one with only a modest bank balance and personal belongings may well fall under the new $15,000 line, and a short stay in covered care may leave a Medicaid cost under $5,000.1

Texas Medicaid Estate Recovery Exemptions: Family Members Who Stop a Claim

Some Texas families are protected not by the size of the estate but by who survives the recipient. Under the MERP rules (1 TAC §373.207), a claim is made only after the recipient's death, and only if none of these people survives:1

• A surviving spouse.
• A child under age 21.
• A child of any age who is blind or disabled under the federal Supplemental Security Income definition (42 U.S.C. 1382c).
• An adult child who lived continuously in the recipient's homestead as an unmarried person for at least 12 consecutive months immediately before the death.

The amendment restated the old "at least one year" test for the adult child as twelve consecutive months immediately before the death, so a child who moved in for a year but left shortly before the death may not qualify.1

It helps to understand what these protections are. Federal law frames the spouse and child protections as a rule about timing: recovery may be made only after the surviving spouse has died, and only at a time when no child under 21 and no blind or disabled child survives. The Texas rules quoted here do not say whether MERP files against the first estate later, once the protected survivor has died. If you are a surviving spouse, the question of what happens to the home after your own death is worth raising with an elder-law attorney while you can still plan for it.1

Two further exemptions apply to fewer families but are easy to miss. The rules exempt certain American Indian and Alaska Native income, resources, and property, and they exempt government reparation payments made to people in special populations.1

If your family is counting on the adult-child exemption, keep records that show where that child lived, month by month, in the year before the death. It is far easier to gather them now than after a notice arrives.

Do Lady Bird Deeds and Other Probate-Avoidance Tools Still Protect the Home?

The answer starts with how MERP's rules define the estate. MERP's old rule defined the estate by reference to the probate estate, and property that passes outside probate falls outside that definition.1

The August 2026 amendment changed that definition. The new definition in §373.105(6) describes the estate as the decedent's real and personal property, including what is added or substituted, as included in the definition of estate in Texas Estates Code §22.012. The amendment deleted the words "the probate" from the old definition and replaced the Texas Probate Code reference with the Texas Estates Code.1

What that means for non-probate property is not something we can tell you from the sources behind this guide. Federal law requires a state to include the probate estate and lets it choose to reach property that passes by survivorship, a life estate, or a living trust. None of the sources we have read says whether Texas has now made that choice, and the answer turns on Texas Estates Code §22.012. So we can no longer say that a Lady Bird deed, a transfer-on-death deed, a pay-on-death or survivorship account, or a living trust keeps a home or account out of MERP's reach.1

If a deed or trust is part of your family's plan, or you were told one already protects the house, have a Texas elder-law attorney review it against the amended rule before you rely on it. One more point from the rules is worth knowing going in. A hardship waiver will not be granted solely because the hardship comes from estate planning that sheltered or moved assets contrary to Medicaid law to avoid recovery.1

The Caregiver-Child Transfer That Moves the Home During Life

There is one more route that solves the problem before estate recovery is ever in the picture. Federal law (42 U.S.C. 1396p(c)(2)(A)(iv)) lets a parent transfer the home, during life, to an adult son or daughter who lived in the home for at least two years immediately before the parent entered a nursing facility and who, as determined by the state, provided care that kept the parent out of that facility. When the state determines those conditions are met, the transfer does not trigger a Medicaid transfer penalty.1

Timing and proof both matter here: the child's two years in the home have to come immediately before the parent became institutionalized, and the state has to agree that the child's care is what kept the parent at home. A caregiving child who has carried this load for years should talk to an elder-law attorney early, while the window is still open.1

Once the transfer is complete and the parent keeps no ownership interest, the home belongs to the caregiver child. Federal law ties even the broadest permitted estate definition to property in which the person had legal title or an interest at the time of death, which is why this route is different from a deed that takes effect only at death.1

Deductions and Hardship Waivers When a Claim Is Filed

Even when MERP does file a claim, two more layers of protection can shrink it or wipe it out. Both run on a 60-calendar-day clock tied to the state's Notice of Intent to File a Claim, so the single most important thing a family can do is respond promptly rather than set the notice aside.1

First, the rules (1 TAC §373.213) let heirs deduct real costs they carried: home-maintenance expenses and taxes, and the costs of care that kept the recipient at home. The request must be in writing and must reach MERP within 60 calendar days after you receive the notice, and you must attach proof of the expenses, such as receipts, to the request.1

Second, Texas grants undue hardship waivers (1 TAC §373.209). The rules recognize five grounds, not one:1

• The property has been the site of a family business, farm, or ranch for at least 12 months before the death, produces 50 percent or more of the heirs' livelihood, and recovery would affect the property and cost the heirs their primary source of income.
• The heirs would become eligible for public assistance, medical assistance, or both if the claim went forward.
• Letting a survivor receive the estate would let that survivor stop relying on public assistance, medical assistance, or both.
• The recipient received medical assistance as the result of a crime committed against them.
• Other compelling reasons.

The hardship rules also protect a homestead whose tax-appraisal-district value for the most recent tax year at the time of the death is under $150,000, when the heirs inheriting it are siblings or direct descendants whose gross family income is below 300 percent of the federal poverty threshold, based on the previous year's tax return. This protection is not automatic: the heirs have to ask for it with a hardship request within 60 calendar days of the notice, and the state will not grant a hardship request the heirs do not make. That threshold was $100,000 before August 27, 2026. A home worth more is not shut out: only the value above $150,000 is subject to recovery. When some heirs qualify and others don't, only the qualifying heirs' share of the home is exempt.1,2

The income test is strict. It is a gross income test with no exclusions or deductions, and MERP looks at each heir separately rather than adding heirs together, unless the heirs are minor children who are siblings. And a waiver will not be granted solely because recovery would keep heirs from an inheritance they expected.1

A hardship request must be made within 60 calendar days of the date on the Notice of Intent to File a Claim, and the request form comes with that notice. MERP decides a complete request within 40 calendar days. If it denies the waiver, you can ask for a review: MERP must receive that request within 60 calendar days of when you receive the denial, and it reviews the request within 40 calendar days of receiving it with all supporting documents.1,2

If a notice arrives and you are unsure which protection fits, get help before the 60 days run. An elder-law attorney can often identify a deduction or waiver that the family would have missed.

Learn More

Find personalized help understanding how Texas estate recovery affects your family's home at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.