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The Medicaid Estate Recovery Program

Have you ever heard people say that they have absolutely no interest in Medicaid because they didn’t want to lose their house? Well, these people have a valid concern. Because of the Medicaid Estate Recovery Program, receiving Medicaid can place the family home in jeopardy if the state taking it when the Medicaid recipient passes away. Luckily, this danger is easily averted.


The Omnibus Debt Reconciliation Act of 2003 mandated that all 50 states incorporate certain laws that would allow the states to be reimbursed for the money their state programs spend on a Medicaid recipient’s healthcare costs. Texas was the last state to incorporate such laws. Why? Because Texas doesn’t like these laws.

Texas has the most protective homestead laws in the nation. As Texans, we are very concerned about maintaining property rights. The idea that someone could lose their home or family ranch simply because they got sick and needed Medicaid is hard to swallow for most Texans, especially our legislators. So, when crafting the federally mandated Medicaid Estate Recovery Program guidelines, our Texas lawmakers refused to follow the pattern set by most other states.

Most states slap a lien against the real property of the deceased Medicaid recipient. However, in Texas, the Medicaid Estate Recovery Program must file a claim for reimbursement in probate court and stand in line with all other creditors to ask for a pro-rata repayment of money spent on the Medicaid recipient’s behalf.

This presents a golden opportunity for Texas Medicaid recipients.


If the Medicaid Estate Recovery Program can only enforce its claim against the Medicaid recipient’s estate in probate court, then the solution to avoiding the Medicaid Estate Recovery Program is to avoid probate court. Without proper estate planning, however, avoiding probate is often difficult to accomplish when someone dies owning real property. Medicaid applicants sometimes attempt to avoid the need for probate by divesting themselves of any real property interests prior to dying. However, transferring property to someone else may cause transfer penalties when applying for Medicaid and could potentially prevent the applicant from receiving benefits. Therefore, professional guidance is often required to ensure that no transfer penalties are applied, that the Medicaid applicant leaves behind no probate estate, and that the Medicaid Estate Recovery Program can be avoided. While some prefer to rely on the statutory exemptions to a Medicaid Estate Recovery Program claim, such as a surviving spouse living in the property or the property’s value is less than $10,000, among a few other exemptions, others enjoy the peace of mind in knowing that the Medicaid Estate Recovery Program cannot enforce their claim.


Typically, Medicaid planning involves the development of a Medicaid Estate Recovery Program protection plan. Such protection plans will often include the execution of a general warranty deed to divest the Medicaid applicant of his real property interest. Alternatively, these protection plans may involve the execution of a Ladybird Deed or Transfer on Death Deed that will transfer the ownership of the real property after death without the need of probate court.

For a free legal consultation, contact us at (713) 936-9620.