MERP: Medicaid Estate Recovery Plan. My aunt left me her house in a written will in Texas and it was probated. She entered the nursing home 2 years prior to her death on Medicaid. After her death October 1, 2012, no letter of claim was sent to me and the title company at the time of sale said there was no MERP claim. Does this mean they will not file or will I be liable down the road?

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What can be a problem with Lady Bird deeds - although they are great for states that allow them - is that whomever is the beneficiary of the LBD has to have the money $$ to be able to afford all the expenses on the home for the rest of the Medicaid recipients lifetime.

Can you afford the taxes, insurance, utitilies, maintenance, etc on the property for possible years & years that the parent is in a NH on Medicaid? If - heaven forbid - there is still a mortgage, it is going to be quite a bundle of $$ out each year.

The person on Medicaid & in a NH has to do a co-pay or their "SOC" to the NH of all their monthly income less a small personal needs allowance. They will have no - nada- zilch of $ to ever pay anything on the house ever again. Now their PNA runs between $ 35 - 90 a month, so is just enough to pay for their phone, cable or maybe just the beauty shop charges per mo at the NH. They will have NO $ to pay on anything on the LBD house which is still in their name.

If family can afford the costs of what is basically a 2nd or a 3rd home with no immediate benefit or legal ownership, than LBD's are great. But what seems to happen is that family just cannot afford the costs on the home in the long run. Or the LBD is set up for all the kids to inherit equally and all of them but 1 could care less about the house and will not contribute their share ever; & that 1 kid cannot afford the expenses on the house. So the home gets sold & the proceeds from the sale has to be used for Medicaid spend-down. WHich totally defeats the reason why the LBD was done, but that's the rules under Medicaid.

Although LBD's sound great as they fall outside of probate so MERP can't enforce it's position but whomever is the beneficiary of the LDB has to have the $$$ to be able to fully pay for everything on the house from now till forever for it to work.
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It was from my understanding of the "The Lady Bird Deed"......FYI....A "Lady Bird" deed offers a simple way to transfer real estate at your death, without probate.

These deeds are also called “enhanced life estate” deeds. With a standard life estate deed, you could name a beneficiary to inherit your property while you keep ownership of it for your lifetime, but with significant restrictions. You wouldn’t have the right to sell or mortgage the property, and you might also be liable to the beneficiary you named if you greatly decreased the value of the property—for example, let a house fall into serious disrepair. By contrast, an enhanced life estate deed (the Lady Bird deed), lets you:

• avoid probate of the property
• keep the right to use and profit from the property for your lifetime
• keep the right to sell the property at any time
• avoid making a gift that might be subject to federal gift tax
• avoid jeopardizing your eligibility for Medicaid
• recognized by Texas and 12 other states
• in some states, prevent the property from being sold, after your death, to repay the cost of Medicaid benefits you received

Legal document that protects a family’s homestead from potential efforts of the state of Texas to recover Medicaid expenditures paid out on behalf of a loved one. Lady Bird deeds offer an alternative method for transferring real property upon the death of the owner. Any individual undergoing Medicaid planning for themselves or a loved one should consider the execution of a Lady Bird deed to protect the property from Medicaid estate recovery.

Many clients planning for long‐term care fear that the State or the Texas Medicaid program will take their home if they apply for and receive Medicaid benefits. The Medicaid Estate Recovery Program (MERP) is responsible for recovering from the estate of a deceased Medicaid recipient funds expended by the Medicaid program for that recipient's benefit. While exceptions to recovery exist, many single individuals face the prospect of their home being subject to estate recovery. The good news is that under current Medicaid rules there are ways to protect the home from any estate recovery effort.

Texas does not have a statute specifically allowing for the creation of a transfer on death deed, however, Texas, along with nine other states, permit the use of Lady Bird deeds as a mechanism for transferring property upon the death of the owner.

A Lady Bird deed, also known as an enhanced life estate deed, allows the grantor to transfer a remainder interest in the property while retaining the ability to sell, convey or mortgage the property without the consent of the remainder beneficiaries. Moreover, if the grantor sells the property during his or her lifetime, the grantor retains one‐hundred percent of the sales proceeds.

The first Lady Bird deed was drafted by a Florida attorney in 1982. The deed got the name Lady Bird deed because in a lecture discussing the benefits of the deed, the presenter used the names of President Lyndon Johnson and his family in an example of how the deed operated.

Lady Bird deeds are commonly used during the process for planning for Medicaid long‐term care benefits. Not only does the execution of a Lady Bird deed protect the home from a potential Medicaid estate recovery claim, but the deed also allows the grantor to transfer a remaining interest in his or her property without incurring a Medicaid transfer of assets penalty. This is because the remainder beneficiaries (i.e. the grantees) do not have an ownership interest in the property that they can sell. The only interest the remainder beneficiary has under the Lady Bird deed is to receive the property if the grantor still owns it at the time of death.

In addition to the benefits of a Lady Bird deed in the Medicaid planning process, Lady Bird deeds can serve other functions for the grantor. First, it allows the grantor to transfer a remainder interest in the property while still maintaining control. The grantor does not need the consent of the remainder beneficiaries for any actions taken over the property and does not owe any duty to the remainder beneficiaries. A Lady Bird deed also avoids probate because the property transfers immediately upon the death of the grantor without the necessity of a court proceeding. Additionally, a Lady Bird deed protects the property from any creditor of the beneficiary. If creditors of the beneficiary threaten the property, the grantor can revoke the Lady Bird deed and execute a new one to a different beneficiary.

For tax purposes, there is also no gift tax liability for the grantor since the transfer is not a completed gift. Upon the death of the grantor the property will receive an adjusted basis for tax purposes, which generally has the effect of avoiding any capital gains tax liability when the beneficiary sells the property after the death of the grantor. Finally, a Lady Bird deed allows the grantor to maintain his or her property tax exemptions, including homestead, over‐65 and disability exemptions.

Lady Bird deeds offer an alternative method for transferring real property upon the death of the owner. Any individual undergoing Medicaid planning for themselves or a loved one should consider the execution of a Lady Bird deed to protect the property from Medicaid estate recovery.

If you’re looking for a way to avoid probate for your house or other real estate, you may run across something called a “Lady Bird” deed. It offers a simple, inexpensive way to transfer real estate at your death, without probate.

A Lady Bird deed may be a good idea if you think you might need Medicaid, the joint state‐federal program that helps many Americans with nursing home costs. It may help preserve your eligibility for Medicaid and keep assets in the family that otherwise would be taken by the state to repay the cost of Medicaid benefits you receive during your life.
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When applying my cousin for Medicaid for AL, I consulted with several attorneys about estate recovery be Medicaid. They and the Social Worker who took the application, told me the same thing. And that is if the property in question was NOT in the probate estate of the recipient, meaning the recipient had reserved a Life Estate in the property, but transferred it at least 5 years prior to receiving benefits, then it was NOT a part of the recipient's estate, as their interest in the property ceases at the moment of death.

Some states are not like this, but all I can do is rely on the legal opinions and the confirmation from the social worker I encountered in NC. Besides, there is nothing I could do about it now anyway.
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Wow!...I have a question as to a work around the "MERP" in the state of Texas. It is called the "Lady Bird Deed". Accord to what I found it
•avoid probate of the property
•keep the right to use and profit from the property for your lifetime
•keep the right to sell the property at any time
•avoid making a gift that might be subject to federal gift tax
•avoid jeopardizing your eligibility for Medicaid
•in some states, prevent the property from being sold, after your death, to repay the cost of Medicaid benefits you received
Most importantly is also:
Medicaid Recovery of Assets

There’s another Medicare-related reason to use a Lady Bird deed, which helps your family members after your death. If you receive Medicaid benefits during your life, then after your death, the state will make a claim for repayment from the assets you leave behind. Federal law requires every state to have such a Medicaid “estate recovery” program.

Some states make payment claims only from the probate estate—that is, the property that goes through probate after your death. Others go after any property you leave, whether or not it goes through probate. For example, a state might make a claim on a payable-on-death bank account that goes (without probate) to your son at your death.

If you leave your property in a way that doesn’t go through probate, and your state doesn’t seek reimbursement from nonprobate assets, then your family will get to inherit your property without repaying the government for the benefits you received.
Can you please advise on what you know about this....Anyone
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I'm a silly optimist - maybe they will never file a claim and the money is yours!
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Don - lets assume that you will get a letter of intent eventually. You do want to file for exclusions/deduction on everything you have spend a penny on for the property. Like taxes, yard care, lightbulbs for the front porch. These all add up and can be deducted from the claim. Read below for the code on this:

Texas Administrative Code:
RULE §373.213 Deduction Allowed for Expenses for Home Maintenance and Costs of Care
(a) An amount equal to necessary and reasonable maintenance expenses and taxes may be deducted from the Medicaid Estate Recovery Program (MERP) claim for maintaining the home of the deceased Medicaid recipient, provided that sufficient supporting documentation of these expenditures, such as receipts, is provided to MERP by estate personal representatives, heirs, or legatees. Necessary and reasonable expenses for maintaining the home include real estate taxes, utility bills, insurance, home repairs, and home maintenance expenses such as lawn care.
(b) An amount equal to the necessary and reasonable expenses for the direct payment of the costs of care (including payment of personal attendant care) provided for a deceased Medicaid recipient that enabled the recipient to remain in his or her home and thereby delayed the institutionalization of the Medicaid recipient may be deducted from the MERP claim, provided that sufficient supporting documentation of these expenditures, such as receipts, is provided to MERP by estate personal representatives, heirs, or legatees.
(c) Requests for obtaining allowable deductions from MERP claims for expenses under subsections (a) or (b) of this section must be made in writing within 60 days after receipt of the Notice of the Intent to File a Claim by MERP. All supporting documentation must be attached to the request and sent to MERP, Home Maintenance/Costs of Care Request, P.O. Box 13247, Austin, Texas 78711.

I've been doing this for my mom's empty house now for a couple of years and it does add up to a tidy sum, which I will file as a deduction to the MERP claim.
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My aunt left me everything in her will as there are no other family members but me alive at this time. I was the one who filled out all the forms for Medicaid for the nursing home and I found the form concerning MERP but did not fill it out. Addresses have not changed and the property is next door to me so I receive mail for both lots. I never received any official papers from TX, Medicaid or any other organization after her death about a claim. I do understand that I am liable to pay back the expenses for the 1.5 years she was in the nursing home, less the expenses I, as the executor, had to pay for upkeep, taxes and legal fees. On the DADS website it says they have 60 days after death to send a letter stating their claim and they did not. Since HMS is the collection agency for Medicaid now, I guess I will await the claim to come from them even though I never received official notice. I don't intend to touch the money and know that it should be paid back to the state. Thanks for the replies and clarification on this matter.
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This from Stargazer - TRGC newsletter for those in real estate / title work
"Addressing MERP in Connection with Closing:
If the property is being offered for a real estate transaction by an estate where decedent was over 55 at the time of death, the closer is required to obtain an affidavit and indemnity from the persons offering title that no Medicaid funds were received by decedent and that no notice of claim has been received by them or someone known to them from either the Texas Department of Health and Human Services, the Texas Department of Aging and Disability Services, or their representative, Health Management Services. So long as the persons offering title can swear to this and offer indemnity against this obligation, it is Title Resources’ opinion that the title agent has met the requirement to make reasonable inquiry.
The situation becomes more difficult when the property is being offered not by the estate or the immediate heirs, but by someone who has a predecessor in title who appears they may have qualified for Medicaid. A MERP claim is not covered by the Master Indemnity Agreement, and the fact a transaction has been previously insured does not necessarily protect the property from liability."

"However, MERP is not a lien on real property, and there is no provision in the law for it to become a lien on real property. (this is because in TX, MERP is a Class 7 claim against the estate in probate) Counsel at Title Resources are of the opinion that no inquiry is required where you are dealing with a subsequent purchaser from a decedent who may or may not have been a Medicaid recipient.You are most likely to run into MERP issues were title has passed through an affidavit of heirship or muniment of title." "It appears that the State of Texas has left a hole in MERP big enough to hamstring the entire program. That is, nothing filed in the real property records evidences the existence of a MERP claim, so there is no public notice of the claim. If a purchaser has made reasonable inquiry, or has reason to think the estate property does not meet the type of estate that would be subject to a MERP claim, under the common law the purchaser is a bona fide purchaser for value without notice & should take the property free & clear of the MERP claim."

To me what this means is that the people that bought your aunt's house from you (as you inherited it and owned it at the time of sale) are OK in that MERP should not be an issue for them when they go to sell the house. BUT as you know that your aunt's estate was subject to MERP, the proceeds from the sale should be paid to the state to reimburse for her care. There have been posts on this forum from family who are now getting HMS letters for claims on assets for those long deceased. So it's good you have the proceeds set aside. There does not seem to be a set statute of limitations for HMS in TX either. If you had challenged the claim, so that HMS had to go to court on this, then it would have to have been resolved within the 4 years allows for probate to exist in TX. Or if you had filed for exemptions, exclusions or hardship, then you would have gotten the release of claim forms. (just as an aside, property with tax assessor value under 100K can file a hardship exemption as the costs to sell lower the value that it doesn't meet the cost/benefit to go to court or do the paperwork for the claim). But since none of that was done, then the whole amount from the sale can be claimed by MERP at this point. Just how they are going to enforce it is the question. My best guess is that they are going to take the approach of a debt collector and your credit will be ruined if you don't come to an agreement on the reimbursement and pay them. If you're at the point that all that doesn't matter to you (like your older, retired, not buying a new house or car, etc anymore and credit worthiness isn't an issue), then
maybe you can go hardball on not paying it. good luck whatever path you take
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Don - it seems 2010 - 2012 was a transition phase for MERP TX. Till about 2009, MERP was totally done by the state and the recovery rates were low. That has since changed. The Texas Health and Human Services Commission, the Medicaid agency in TX, has ultimate responsibility for “MERP”. However, many of the administrative functions have been delegated to the Department of Aging and Disability Services (TxDADS & these letters come out of Austin or Lubbock or the local office if you are in the big counties e.g. Bexar, Harris etc.), BUT the actual collections are handled by a contractor called Health Management Services, Inc (“HMS”). HMS is often the primary point of contact that heirs have with the MERP. HMS letters go on on state letterhead from Dallas/Irving.

What is supposed to happen is that whomever is on file @ TxHHS's as the contact person & address for the Medicaid recipient will be sent the MERP "letter of intent". Now think back…..who was it in your family who got any correspondence regarding your aunt and her stay @ the NH; who did her Medicaid application; who was her annual renewal form for medicaid sent to? that is where the letter of intent was sent to. That is the person who is the one that is held liable for properly doing whatever to be compliant for MERP. (So if you were not auntie's person but instead another cousin was, than this was their error). MERP does not try to find the attorney for probate or other family either on this, nor do they have to. If the letter was not responded to in the very specific timeframe indicated in the MERP letter, the position seems to be that the claim is valid and it can become a claim/lien by default on the property.

What is supposed to happen is that you respond to the letter with whatever documentation is needed for the exemption, etc you are filing for. Then MERP does an evaluation of the exemption (cost/benefit analysis) and either approves or denies the request. If approved they send you a release of claim document. Then this goes to probate court, for the judge to distribute the house as per the will OR is filed at the courthouse if you are doing the ownership transfer as a muniment of title. If it's denied, they send you a letter stating the claim amount. I bet your aunt's house was overlooked in the transition.

Now one problem with MERP TX is how the enforcement of the "claim" is done.
I'm going to do another post on the issue & problems of having no exact "bright line rules" on title insurance and property transfer with MERP.
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I did notify an attorney at that time and he said a claim would be filed. However, when I contacted him at the time of sale he said he had not received any notification and I never did. I deposited the check and will keep it in a separate account and see if the state will make a claim.
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Your aunt died in October 2012? I am surprised that Medicaid did not notify you long before this time. An attorney should have been notified back then. Please notify an attorney and obtain all proper documented proof.
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I would go get that proof from the title company you mention for proof asap. In my State they go after all assets when a nursing home patient who has been getting free nursing home care dies. If the house was in an irrevocable trust 5 years prior to the nursing home you should be okay. I am far from an expert ! I would get that proof and get to an attorney.
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