Medicaid Estate Recovery (MERP): Can the State Take Your Parents' House After They Die?

A family breathes easier when a parent finally qualifies for Medicaid to cover nursing home care. The home was exempt from the asset limit, so they assume it is safe. After the parent dies, a letter arrives from the state: it is seeking reimbursement for the long-term care Medicaid paid, and the home — the family’s largest asset — is the target. “Exempt while alive” was never the same as “protected after death.” Nobody told them about the second rule.

The Medicaid Estate Recovery Program, or MERP, is the part of Medicaid families understand least and discover latest. It is the reason Medicaid is better described as a loan against the estate than as free coverage. Here is how MERP works, when the home is actually at risk, and what protections exist — so the recovery letter is not the first time you hear about it.

What MERP is and why it exists

Federal law has required every state (and the District of Columbia) since 1993 to seek reimbursement of long-term care costs from the estates of deceased Medicaid recipients age 55 and older. Medicaid is the “payer of last resort” for custodial long-term care, and estate recovery is how the program recoups what it spent once the recipient no longer needs the assets.

The practical reframing matters: Medicaid did not give the family money. It advanced the cost of care and, after death, asks the estate to pay it back. For most families the home is the only meaningful asset left at the end, so the home is where recovery lands.

The exemption that misleads families

During the recipient’s life, the primary home is generally exempt from Medicaid’s asset limit — below the state’s home equity cap (a minimum of about $752,000 in 2026, higher in some states; California sets no limit) and as long as the recipient intends to return or a spouse or dependent lives there. That is why a person can own a home and still qualify for Medicaid.

Families read “exempt” as “Medicaid can’t touch the house” and stop there. The exemption only governs eligibility during life. After death, the home loses its protected status and becomes reachable by MERP. The distinction between “exempt during life” and “protected after death” is the single most consequential misunderstanding about Medicaid and the home.

Probate-only vs. expanded recovery states

How far MERP can reach depends entirely on the state, and states fall into two camps:

• Probate-only recovery states (about half of states plus DC) can recover only from assets that pass through probate — generally, property titled in the deceased’s name alone. Assets that avoid probate often escape recovery.
• Expanded recovery states (about half of states — including AL, AZ, AR, CT, GA, ID, IN, IA, KS, KY, and ME, among others) can reach beyond probate to non-probate assets: jointly-held property, life estates, payable-on-death accounts, and living-trust assets. In these states, the strategies that work in probate-only states are far less effective.

This split is why a tactic a relative used successfully in one state can fail completely in another. Knowing which camp your state is in is the starting point for any MERP conversation.

When the home is protected from recovery

MERP is mandatory, but it is not unlimited. Federal rules require states to defer or waive recovery in specific situations:

• Surviving spouse: the state may not recover while a surviving spouse is living. (Some states pursue recovery after the second spouse’s death; others release the claim.)
• Child under 21, or a blind or disabled child of any age: recovery is barred while such a child survives.
• Undue hardship waiver: every state must have a process to waive recovery when it would cause undue hardship — for example, when the home is the sole income-producing asset of survivors. In practice these waivers are available but rarely granted, so they are a backstop, not a plan.

These protections defer recovery; they do not always erase it. When the qualifying survivor is gone, the claim can revive against whatever remains.

Strategies families use before death

Because recovery happens at death, the meaningful planning happens before it. Each of these works in some states and not others, and each carries trade-offs that warrant an elder law attorney’s review:

• Irrevocable trust (MAPT): a home transferred into a Medicaid Asset Protection Trust at least five years before the Medicaid application is outside the estate, and so outside recovery. This is the cleanest approach but requires the longest lead time — the five-year look-back applies to the transfer.
• Lady Bird deed (enhanced life estate deed): lets the home pass to heirs outside probate, sidestepping MERP in probate-only states. Available in only a handful of states (including Florida, Texas, Michigan, Vermont, and West Virginia). Far less useful in expanded-recovery states.
• Partnership long-term care insurance: a partnership-qualified LTC policy protects assets dollar-for-dollar from both Medicaid’s asset limit and estate recovery. For every dollar the policy pays in benefits, a dollar of assets is shielded from MERP.
• Joint ownership: adding a joint owner with right of survivorship can remove the home from the probate estate in some states — but it is risky. It can trigger look-back penalties and exposes the home to the co-owner’s creditors. In expanded-recovery states it may not work at all.

The common thread: timing and state law decide everything. A strategy chosen without confirming both is a strategy that may not hold.

How MERP changes the funding decision

MERP does not mean Medicaid is a bad choice — for many families it is the only realistic way to cover years of custodial care. It means Medicaid should be evaluated with its true cost included. “Free” Medicaid that recovers a $250,000 home from the estate has a real price; it is just deferred and paid by the heirs rather than the recipient.

That reframes the planning question. If preserving the home for heirs is a priority, the time to act is years before care is needed — through a trust, partnership insurance, or a state-appropriate deed — not after a parent is already in a facility. By the time the recovery letter arrives, the options are gone.

Seeing where Medicaid sits among the other funding sources helps put estate recovery in proportion. Our senior care cost calculator estimates costs by care type and state and walks through the funding stack, so the cost Medicaid would advance — and later recover — is visible up front. For how Medicaid fits alongside private pay, insurance, and VA benefits, see the funding-stack approach to paying for a nursing home, and for the eligibility thresholds that get a family to Medicaid in the first place, Medicaid spend-down rules by state.

The bottom line

MERP turns Medicaid into a loan secured by the estate, with the home as the usual collateral. The home is exempt while the recipient lives and exposed after they die; how far recovery reaches depends on whether the state recovers from probate only or beyond; and the protections that exist mostly defer rather than erase the claim. Families who learn this early have real options. Families who learn it from the recovery letter have none.