Texas gives an estate 60 days to answer a Notice of Intent to File a Claim, and almost every dollar a Texas family loses to the Medicaid Estate Recovery Program is lost inside that window by not answering it properly. The deductions, the exemptions and the hardship waivers are all real and all generous by national standards. They are also all things you have to ask for.
This page prices the mistakes. Each section takes something families routinely do — or fail to do — and states what it costs in dollars, in months, or in the loss of a protection that was available for the asking. Read it with your own notice in front of you and the date circled.
Texas Medicaid is administered by the Texas Health and Human Services Commission. The recovery program is known as MERP and is operated with an outside contractor; long-term services and supports run largely through STAR+PLUS and the Medicaid nursing facility program. Figures are as of 2026 and should be confirmed with HHSC or the MERP contact named on your notice. Nothing here is legal or eligibility advice.
In This Article
- Mistake 1 — Letting the Notice of Intent Sit. Cost: Every Deduction and Exemption Below
- Mistake 2 — Not Claiming the Deductions. Cost: Money the Family Already Spent
- Mistake 3 — Missing the Texas-Only Exemptions. Cost: the Homestead
- Mistake 4 — Panicking Over a Claim That Does Not Exist. Cost: Assets Sold for No Reason
- Mistake 5 — Transferring the House Too Late. Cost: Months of Ineligibility
- Mistake 6 — The Beneficiary Form Nobody Updated. Cost: the Entire Death Benefit
- Where Texas Departs From the Federal Baseline, and Where It Follows
- Frequently Asked Questions
Mistake 1 — Letting the Notice of Intent Sit. Cost: Every Deduction and Exemption Below
MERP’s process begins with a Notice of Intent to File a Claim, generally sent within about 30 days of the program learning of the death. The estate is given roughly 60 days to respond with information about the estate, the heirs, and any exemption or deduction being claimed.
That response form is where the entire case is made. It is where you assert a surviving spouse, a disabled child, or the Texas-specific resident adult child exemption. It is where you list the deductions. It is where you request a hardship waiver. A family that ignores the notice because it looks like a bill has not merely missed a deadline; it has skipped the only structured opportunity to reduce the claim.
What it costs: potentially the entire recoverable value of the estate, in a case where a single documented exemption would have ended the claim outright.
What to do inside the 60 days, even if your file is incomplete: respond in writing, state which exemptions and deductions you intend to claim, ask for an itemized accounting of the Medicaid paid by date of service and category, and say that documentation will follow. Send it in a way that produces a delivery record. Recovery is mandatory only for nursing facility services, home and community-based services and related hospital and prescription drug services furnished at age 55 or older, and a claim assembled from payment data can contain lines that fall outside that. Compare the general estate recovery rules against what your notice actually asserts.
Mistake 2 — Not Claiming the Deductions. Cost: Money the Family Already Spent
Texas allows an estate to reduce the MERP claim by amounts the family has genuinely laid out, and these are among the more generous deduction rules in the country. They are only applied if claimed, with receipts.
- Costs of the decedent’s last illness that were not reimbursed.
- Funeral and burial expenses, within the program’s stated limits.
- Costs of maintaining the homestead paid by an heir — property taxes, homeowner’s insurance, utilities and necessary upkeep during the period after the recipient entered care. Families pay these for years without keeping the receipts, and then cannot prove them.
- Necessary and reasonable care provided by a family member that kept the recipient out of a facility, where documented, within the program’s stated limits.
What it costs to skip them: in a modest estate, thousands of dollars in already-spent money, and in some estates enough to bring the net recovery below the point where MERP pursues it at all.
Confirm the current deduction categories and any dollar caps with HHSC or the MERP contact on your notice, because the program publishes and updates them. Keep the paperwork now: tax statements, insurance declarations, utility bills, repair invoices and a dated log of care provided. Reconstructing three years of homestead expenses from memory does not survive review.
Mistake 3 — Missing the Texas-Only Exemptions. Cost: the Homestead
Texas applies the federal exemption set and adds protections that do not exist in most states. This is the section most worth reading twice.
The federal set: a surviving spouse; a child under 21; a child of any age who is blind or has a disability; a sibling with an equity interest who lived in the home for at least a year before institutionalization; and a caregiver child who lived in the home for the two years immediately before institutionalization and provided care that delayed the move.
The Texas addition: MERP generally does not pursue a claim where an unmarried adult child resided continuously in the decedent’s homestead for at least one year before the death. That is a genuinely Texas-specific protection and it is much easier to satisfy than the federal caregiver-child test, which requires two years and proof that the care delayed institutionalization. Many Texas families qualify under the state rule while assuming they fail the federal one.
Prove it the way you would prove residence anywhere: driver’s licence, voter registration, utility accounts, tax records, bank statements and mail at the address for the full period.
What it costs to miss: a homestead that would have been protected outright.
Texas’s constitutional homestead protections are separate from all of this and are strong in their own right. How they interact with a MERP claim in a specific estate is a question for a Texas elder law attorney applying them to your facts, not something to assume in either direction.
| Mistake | What It Costs | Window to Fix It | Who to Contact |
|---|---|---|---|
| Ignoring the Notice of Intent | Every deduction and exemption available | About 60 days from the notice | The MERP contact on the notice |
| Not documenting homestead upkeep | Thousands in already-spent money | Before the claim is settled | HHSC, with receipts |
| Missing the resident adult child exemption | The homestead | With the notice response | MERP, with proof of one year’s residence |
| Selling assets to pay a claim below threshold | The value liquidated, unnecessarily | Before selling anything | HHSC, to confirm the $10,000 and $3,000 floors |
| Transferring property inside 60 months | Months of private-pay care | Before the transfer | Texas elder law attorney |
| Stale beneficiary designation | The entire death benefit | Any time the insured is alive | The insurance carrier, in writing |
Mistake 4 — Panicking Over a Claim That Does Not Exist. Cost: Assets Sold for No Reason
Some Texas families sell a house, cash a policy or take out a loan against property to pay a claim that MERP was never going to pursue. Three thresholds decide this, and all three are checkable.
- The March 1, 2005 line. Texas MERP applies to covered long-term services and supports received on or after March 1, 2005. Medicaid long-term care furnished entirely before that date is outside the Texas program. This is a Texas-specific start date and it still matters for older care histories.
- The $10,000 estate floor. MERP does not pursue a claim where the value of the estate is $10,000 or less.
- The $3,000 claim floor. MERP does not pursue a claim where the amount of the Medicaid claim itself is $3,000 or less, or where the cost of recovery would exceed the amount recoverable.
What the mistake costs: the whole value of whatever was liquidated, plus any Medicaid eligibility consequences the sale created for a surviving spouse.
Confirm all three figures with HHSC for the current year before acting on them — they are program thresholds and can be adjusted. And note the distinction that trips people: MERP is a claim against the probate estate. Texas uses the probate-only definition and has not adopted the expanded definition Ohio and Wisconsin use, so assets passing by survivorship or valid beneficiary designation are generally outside it. In a Texas probate the claim is presented in the statutory classification of estate claims and is commonly described as a Class 7 claim — behind administration costs, funeral and last illness expenses, and secured debts.
Mistake 5 — Transferring the House Too Late. Cost: Months of Ineligibility
The most expensive planning error in Texas is not made after a death. It is made ninety days before an application.
Transfers for less than fair market value in the 60 months before a long-term care Medicaid application create a penalty period — a stretch of ineligibility computed from the value transferred, which begins when the applicant is otherwise eligible and actually needs care. That is the worst possible moment for it to start, because the family is now paying privately for care they had budgeted Medicaid to cover.
What it costs: in Texas, private-pay nursing facility rates quoted in cost-of-care surveys of the Genworth type published in the mid-2020s commonly run in the five-to-seven thousand dollar range per month for a semi-private room, with wide variation between metro and rural markets. A transfer that generates a six-month penalty therefore has a real price measured in tens of thousands of dollars, against an asset that in many cases was never going to be recovered anyway because of the exemptions above.
Read how the look-back period actually works before signing anything, and get a Texas elder law attorney to price the penalty next to the protection.
Eligibility mechanics for context: the individual countable resource limit is commonly cited at $2,000 as of 2026, and Texas is an income-cap state with the long-term care income standard generally set at 300% of the federal SSI benefit rate, roughly $2,982 per month for 2026. Applicants above the cap typically use a qualified income trust arrangement. Confirm all of it with HHSC and see Texas Medicaid asset and income limits.
Mistake 6 — The Beneficiary Form Nobody Updated. Cost: the Entire Death Benefit
This is the cheapest mistake to prevent and one of the most expensive to make.
Paid to a living named beneficiary: a life insurance death benefit passes by contract, never becomes part of the probate estate, and is outside a MERP claim. Payable to “the estate”: it is an estate asset and it is exposed. The accidental version is a policy naming a spouse who died first, with no contingent beneficiary added, which typically defaults to the estate under the contract’s own terms.
What it costs: the full face amount, converted from money the children receive into money that funds the state’s claim. On a $50,000 policy that is a $50,000 mistake made by not filling in one line.
Fix: request written confirmation of the current beneficiary designation from the carrier. Not the copy in the drawer — the carrier’s record.
Before eligibility, the analysis changes. Cash value is a countable resource against the $2,000 limit. Life insurance with a total face value at or below $1,500 is generally excluded as a burial resource under the federal rule Texas follows, and an irrevocable funeral trust can convert cash into a non-countable prepaid arrangement within state limits. Above that, the ordered options are reduce to paid-up, borrow, surrender, or sell.
Selling honestly: a settlement converts a countable asset into countable cash that is itself subject to spend-down, and a sale for less than fair value inside the look-back creates a penalty — see how a settlement interacts with the look-back. It can be the right call when premiums are unaffordable and a policy is heading for lapse. It is usually the wrong call for a small burial-sized policy, for coverage a surviving spouse still needs, and for a healthy insured with a long life expectancy.
Where Texas Departs From the Federal Baseline, and Where It Follows
Departures. The March 1, 2005 start date for recoverable long-term services. The $10,000 estate threshold and $3,000 claim threshold below which MERP does not pursue recovery. The exemption for an unmarried adult child who resided in the homestead for at least one year before death, which has no federal counterpart. The published deduction categories for last illness costs, funeral expenses, homestead maintenance paid by heirs and documented family caregiving. The structured Notice of Intent process with its 60-day response window. And Texas’s constitutional homestead protections, which sit alongside all of it.
What Texas follows. The probate-only estate definition, which many states share. The age-55 trigger and the mandatory service categories. The full federal exemption set. TEFRA lien authority for permanently institutionalized recipients where no protected relative lives in the home. The mandatory undue hardship process. And the 60-month look-back.
Texas also has no state income tax, no inheritance tax and no estate tax as of 2026, so the claims competing with MERP in a Texas estate are ordinary debts, secured claims and administration costs. Confirm current tax treatment with your own CPA.
If home care is still the live question rather than a probate, start with Texas home and community-based long-term care options, because a year of community services produces a far smaller recoverable total than a year in a facility.
If an in-force policy is part of the picture, a free policy review will establish what the contract is actually worth today before anyone decides whether to keep it, reduce it, or move it. Pine Lake Legacy provides education and policy reviews only; it does not purchase policies.
Frequently Asked Questions
How long does a Texas estate have to respond to a MERP notice?
The Notice of Intent to File a Claim generally allows about 60 days for the estate to respond with information about heirs, exemptions and deductions. That response is where exemptions are asserted and deductions are claimed, so ignoring it forfeits the main opportunity to reduce the claim. Respond in writing inside the window even if documentation follows later.
Is there an amount below which Texas will not pursue recovery?
Yes. MERP does not pursue a claim where the estate is valued at $10,000 or less, where the Medicaid claim itself is $3,000 or less, or where the cost of recovery would exceed what could be recovered. Confirm all three figures with the Texas Health and Human Services Commission before selling anything to pay a claim.
Does an adult child living in the home stop a Texas MERP claim?
Often yes. Texas generally does not pursue a claim where an unmarried adult child resided continuously in the decedent’s homestead for at least one year before the death. That is a Texas-specific protection and it is easier to meet than the federal caregiver-child exemption, which requires two years plus proof the care delayed institutionalization. Document the residence carefully.
Does MERP apply to care received before 2005?
Texas MERP applies to covered long-term services and supports received on or after March 1, 2005. Long-term care furnished entirely before that date falls outside the Texas program. For older care histories, ask HHSC for an itemized accounting by date of service so the pre-2005 portion can be identified and excluded from the claim.
Can MERP reach a life insurance policy in Texas?
Only when the proceeds land in the probate estate. A death benefit paid to a living named beneficiary passes by contract and is outside the claim. A policy payable to the estate, or one whose only named beneficiary predeceased the insured with no contingent added, becomes an estate asset. Confirm the designation in writing with the carrier.
What deductions reduce a Texas MERP claim?
Texas allows documented deductions including unreimbursed costs of the last illness, funeral and burial expenses within stated limits, homestead maintenance costs such as taxes, insurance and necessary upkeep paid by an heir, and reasonable family caregiving that kept the recipient out of a facility. Keep receipts contemporaneously and confirm current categories and caps with HHSC.
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Related Reading
- Texas Medicaid Asset Income Limits
- What Is Medicaid Estate Recovery
- Medicaid Home Care Waivers Texas
- What Is The Medicaid Look Back Period
- Medicaid Lookback Selling Policy
- Life Settlement Taxes Texas
- Texas Insurance Department Consumer Help
Pine Lake Legacy does not purchase life insurance policies and does not provide legal, tax, or investment advice. Information provided is for educational purposes only. Eligibility for any option, including life settlements, is not guaranteed and depends on individual circumstances, policy terms, underwriting, and market conditions. Consult independent legal, tax, or financial professionals before making decisions regarding a life insurance policy.