Estate Planning and the Medicaid Estate Recovery Program (M.E.R.P.)
The Texas Homestead Exemption may not protect you from M.E.R.P.
With the Texas legislature’s adoption of The Medicaid Estate Recovery Program, estate planning has become an important aspect of opting to receive Medicaid benefits. The Medicaid Estate Recovery Program (M.E.R.P.) was created to repay the Medicaid program by requiring the seizure of property in the estates of some of the Medicaid recipients after they die. The program applies to those who started receiving Medicaid benefits after the age of 55 for nursing facility services, intermediate facilities for the mentally ill, and Home and Community-Based Services and Community Attendant Services.
There are four general categories of heirs that are exempt from a M.E.R.P. claim: (1) a surviving spouse; (2) surviving Children under 21 years of age; (3) surviving child of any age who is blind or disabled; or (4) an unmarried adult child residing continuously in the decedent’s homestead for at least one year prior to the time of the Medicaid recipient’s death. However, it is the heirs that do not fall into these four categories that run into issues.
In Texas, we have become accustomed to a tradition of having our homes protected from creditors. Generally, the Texas homestead laws prevent a creditor (except for a mortgage holder, taxing authority, etc.) from forcing the sale of the homestead to satisfy nonpayment of a debt. The Texas homestead exemption has been traditionally known as a great way to shield wealth from creditors.
However, the laws under M.E.R.P have broken away from this tradition and allow the Texas Department of Aging and Disability Services to seize an heir’s homestead who does not qualify for one of the exemptions mentioned above. There are hardship waivers and other exceptions, but they are generally difficult to qualify for. If the right planning is not taken ahead of time, it can create a long and drawn-out process for those who must fight the M.E.R.P. claim to preserve their homes. Therefore, it is essential for any family member looking to help an older loved one receive help from Medicaid to make sure they have planning in place to avoid these issues. There are steps that can be taken to make sure certain aspects of the recipient’s estate will not be subject to M.E.R.P.
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