Can Medicaid Take Your House in Texas and How to Protect It?

Medicaid cannot take your house in Texas while you are alive. Your homestead does not count as an available resource when the state decides whether you qualify for long-term care coverage. The risk arrives after death, when the Medicaid Estate Recovery Program (MERP) can file a claim against your probate estate to recoup what the state paid for your long-term care. Even then, the program’s reach is narrower than most families assume, and several exemptions, deed strategies, and hardship waivers can keep the home with your heirs.

Your Home During Your Lifetime

When you apply for Medicaid to cover a nursing facility stay or other long-term services, your home is an exempt resource as long as you, your spouse, or a dependent relative lives there.¹ Moving into a facility does not end that protection. The home stays exempt as long as you express an intent to return, or a spouse or dependent relative continues to live there.

One boundary matters for expensive homes. Texas applies a home equity cap of $752,000 for 2026.² If your equity exceeds that amount, you may not qualify for Medicaid-covered institutional care. The cap does not apply when a spouse is still living in the home, and for most Texas homeowners the value never approaches it.

What MERP Can and Cannot Reach

Federal law requires every state to recover some Medicaid spending on long-term care from deceased recipients’ estates.³ In Texas, the Health and Human Services Commission (HHSC) carries out that requirement through MERP. Recovery applies only to recipients who were 55 or older when they received covered long-term care services, and only to what Medicaid actually paid on their behalf.

MERP acts only after death, and only against the probate estate. That last point drives most planning decisions. A probate estate contains assets titled in the deceased person’s name alone with no designated beneficiary. Assets that pass outside probate are not part of it. Life insurance proceeds, retirement accounts with named beneficiaries, joint bank accounts with rights of survivorship, and property transferred by certain deeds all move directly to the new owner and stay out of MERP’s reach.⁴

Recovery is also limited by what Medicaid was spent on. MERP targets long-term care: nursing facility stays, intermediate care facilities for individuals with an intellectual disability, home and community-based waiver programs, and hospital and prescription drug costs tied to those services.⁵ Regular Medicaid health coverage for a Texan under 55 who is not institutionalized will never generate an estate claim.

The process starts with a notice. HHSC sends a Notice of Intent to File a Claim to the executor or administrator of the estate. From the date of that notice, heirs have 60 days to request an undue hardship waiver or otherwise respond.⁶ That deadline is short. Missing it forfeits options.

When a Claim Is Automatically Barred

Texas law prohibits MERP from filing a claim in several situations. These bars are automatic. No application is required.

A surviving spouse blocks recovery entirely, regardless of where the spouse lives or how much Medicaid spent. The state must wait until the surviving spouse also dies before attempting anything against the original recipient’s estate.⁷
A surviving child under 21 protects the entire estate.
A surviving child of any age who meets the Social Security Administration’s standards for blindness or permanent and total disability also protects the entire estate.⁷
An unmarried adult child who lived full-time in the recipient’s home for at least one continuous year before the recipient’s death protects the home. The residency must be unbroken for the full year, but the child does not have to have acted as caregiver.⁷

MERP also will not file a claim if the probate estate is worth $10,000 or less, if the recoverable Medicaid amount is $3,000 or less, or if the cost of selling the property would exceed its value.⁷

Keeping the House Out of Probate

Because MERP can only reach probate assets, the most reliable protection is to make sure the home never enters probate. Two deed tools do this well in Texas.

Lady Bird Deeds

A Lady Bird deed, formally an enhanced life estate deed, names who will inherit the home after your death while leaving you in full control during your lifetime. You can live in the house, sell it, refinance it, or revoke the deed. When you die, ownership transfers automatically to the person named in the deed, without going through probate. Since the property never becomes part of the probate estate, MERP has nothing to claim against.

The Lady Bird deed also holds up during the Medicaid application itself. Because you keep full ownership and control, the deed is generally not treated as a transfer of assets for look-back purposes. The transfer only happens at death, so no gift is made and no penalty period is triggered. That combination of lifetime control, probate avoidance, and Medicaid compatibility explains why the Lady Bird deed is among the most widely used planning tools in Texas.

Transfer on Death Deeds

A Transfer on Death Deed (TODD) works on a similar principle. You designate a beneficiary who takes the property at your death, and you retain full ownership until then. Like the Lady Bird deed, a TODD passes property outside of probate, so MERP cannot reach it. One caveat: if the probate estate is insolvent, a court may in some circumstances cancel a TODD and pull the property back into the estate to satisfy debts. That outcome is uncommon, but it is a risk the Lady Bird deed does not carry.

Both deeds should be prepared by an attorney familiar with Medicaid planning. A deed drafted incorrectly, or executed at the wrong moment, can trigger look-back penalties or simply fail to achieve the intended protection.

Why Giving the House Away Does Not Work

Families sometimes think about signing the house over to a child before applying for Medicaid. Texas has a rule built specifically to catch that. When someone applies for Medicaid-funded institutional care, the state reviews every asset transfer made during the 60 months before the application or the date of institutional entry, whichever is later.⁸

If the state finds a transfer for less than fair market value inside that window, it imposes a penalty period during which the applicant cannot receive Medicaid nursing facility coverage. The penalty is calculated by dividing the transferred value by a daily rate. As of September 2025, the Texas rate is $262.37 per day.⁹ A $50,000 gift would produce roughly 190 days of ineligibility. During that stretch, the family pays the care bill out of pocket.

So a late gift of the home usually backfires. It does not avoid recovery, and it leaves the recipient without coverage precisely when care is needed. Planning has to start well before the five-year window, which is exactly why the deed tools above exist.

Hardship Waivers

When no automatic exemption applies and the home is in the probate estate, heirs can still ask HHSC to waive or reduce the claim. The request must be filed within 60 days of the date on the MERP notice.¹⁰

The state recognizes several undue hardship grounds. A family business, farm, or ranch waiver applies where the property has been the operating site of a family enterprise for at least 12 months before death, is the primary income-producing asset of the heirs, and generates 50% or more of their livelihood. A waiver is also available if paying the claim would push the heirs onto public assistance, or if inheriting the property would let them come off public assistance. Recovery can be waived when the recipient needed Medicaid because of a crime committed against them, and the regulations include a catch-all for other compelling reasons that HHSC can weigh case by case.¹⁰

Two limits are worth knowing. HHSC will not grant a hardship waiver just because the heirs would prefer to keep an inheritance, and it will not grant one where the hardship arose from planning strategies that sheltered assets in violation of Medicaid rules.¹⁰

The Homestead-Specific $100,000 Waiver

Texas has a separate hardship rule that applies only to the homestead. If one or more siblings or direct descendants (children, grandchildren) inherit the home, and each qualifying heir’s gross family income is below 300% of the federal poverty level, up to $100,000 of the home’s tax appraisal value is exempt from recovery.¹⁰ The 2026 poverty guidelines set the applicable income thresholds.¹¹

If the home is appraised at $100,000 or less, this waiver can wipe out the MERP claim entirely. If the home is worth more, the first $100,000 is protected and only the equity above that amount is subject to recovery. When multiple heirs inherit and only some qualify, only the qualifying heirs’ shares are protected, with a combined $100,000 cap.

Reducing the Claim With Maintenance Costs

Even when no waiver applies, heirs can ask HHSC to deduct what they spent maintaining the home during the recipient’s time on Medicaid. Qualifying expenses include property taxes, utility bills, homeowner’s insurance, repairs, and routine upkeep such as lawn care. The state will also credit direct payments heirs made for personal attendant care that let the recipient stay home and delay entering a facility.⁷ Receipts and payment records are required, so families should keep organized documentation from the moment those expenses start.

1
Texas Health and Human Services. Medicaid for the Elderly and People with Disabilities Handbook – F-3100, The Home and Resource Exclusions
2
Texas Health and Human Services. Medicaid for the Elderly and People with Disabilities Handbook – F-3600, Substantial Home Equity
3
Medicaid.gov. Estate Recovery
4
Texas Health and Human Services. Medicaid Estate Recovery Program FAQs
5
Texas Health and Human Services. Medicaid for the Elderly and People with Disabilities Handbook – D-7800, Medicaid Estate Recovery Program
6
Legal Information Institute. Texas Admin Code 1-373.307 – Notice of Intent to File a Claim upon the Death of a Medicaid Recipient
7
Texas Health and Human Services. Your Guide to the Medicaid Estate Recovery Program
8
Texas Health and Human Services. Medicaid for the Elderly and People with Disabilities Handbook – I-2100, Look-Back Policy
9
Texas Health and Human Services. Medicaid for the Elderly and People with Disabilities Handbook – I-5100, Transfer of Assets Divisor
10
Legal Information Institute. Texas Admin Code 1-373.209 – Undue Hardship Waivers
11
HHS ASPE. 2026 Poverty Guidelines