By Lydia Blair
Special Contributor
A daltxrealestate.com reader writes “My title company is now requiring a MERP certificate from the state any time a deal involves a deceased seller, and it’s slowing closing down BIG TIME. Does anybody else have the same process with their title company, or am I on my own here? How can I speed this up?”
Dear Reader,
MERP stands for Medicaid Estate Recovery Program. This program allows the state to file a claim against the estate of a deceased Medicaid recipient, age 55 or older, who received payments for certain long-term care services. Claims can include the cost of services, hospital care and drugs paid for by Medicaid.
If the deceased owner of the property received Medicaid, their estate (or heirs) may have to pay it back to the state. This is why when you’re selling the property of the deceased, you will very likely need a MERP Certificate if a will has not been probated. If a will has been probated, then it shouldn’t be an issue because probate will have taken care of it.
The heirs selling the property should already know about the MERP requirement because they should have received a claim “letter of intent” from MERP when the homeowner died. Often people ignore it, hoping it will just go away. Or they are dealing with grief and other aspects of losing a loved one. But ignoring it will only set them up for a shock when they go to sell the inherited property.
Any good title company is going to require a MERP certificate when there is no probated will. Hopefully, they will get the process started quickly – when they first learn of the situation. The “MERP Cert” requires the deceased owner’s Medicaid and/or social security number and must be signed by an heir/beneficiary of the deceased owner’s estate. The title company can only file the request as fast as the heirs give them information.
The reason your title company is just now requiring a MERP Cert may be because they had to pay a title insurance claim regarding a missed MERP claim.
It typically takes about 30 days to get the MERP Cert. But the time could be longer or shorter depending on a lot of circumstances. MERP collections are usually contracted out to Health Management Services (HMS). They are essentially the collection agency for MERP and they get a percentage of what they recover. HMS will request information from the estate regarding assets and bank accounts. The longer the estate takes to respond to them, the longer it will take to get the MERP Cert.
Heirs (and their real estate agents) should start getting all documents (death certificate, will, inventory, …) and file with MERP before getting a property under contract. If you have your paperwork together the process is much faster.
We look at a MERP claim the same as a claim by any creditor. MERP claims must be addressed before closing the transaction, issuing title insurance and transferring title to a new owner. If there is a MERP claim, the title company will withhold that amount from the proceeds of the property sale and pay the claim.
Some important details about the MERP program –
- MERP claims are against a deceased’s homestead as of the time of death.
- Only remaining assets left by the deceased are liable for the MERP claim.
- MERP will not make a claim if there is a surviving spouse or dependent children under 21.
- The Texas statute of limitations for a MERP claim is 4 years.
- There are several exceptions to MERP claims that can be found on their website.
- The state allows a hardship waiver to be filed in certain situations.
- The timetable for exemptions and waivers is very strict.
- In Texas, a MERP claim is paid after funeral bills, administration expenses, secured claims, child support and taxes. It is paid before most other types of creditors and before the beneficiaries are compensated.
While it won’t help you with a current MERP claim, it might be good to know that there are a couple of ways to protect your home from MERP prior to your death. You can deed your property to someone through a life estate deed, or “Lady Bird Deed.” Basically, a Medicaid recipient deeds their homestead to someone while simultaneously reserving the right to live there during the Medicaid recipient’s life. For Medicaid purposes, they no longer own the property after death. As long as the deed is prepared correctly and filed correctly with the county prior to the recipient’s death, the home is protected from claims like MERP.
There is also a Transfer on Death Deed. Texas will allow a properly prepared and filed Transfer on Death Deed to protect a Medicaid recipient’s homestead from a MERP claim. Both of these types of deeds have several strict and specific requirements. Properly filing a deed is a step that must not be overlooked. Check the Texas Estates Code 114.151. Consult an attorney or accountant if you have questions.
MERP exists to protect the tax-paying public that supports the Medicaid program. For more MERP information, go to: https://hhs.texas.gov/laws-regulations/legal-information/your-guide-medicaid-estate-recovery-program
The opinions expressed are of the individual author for informational purposes only and not for the purpose of providing legal advice. Contact an attorney to obtain advice for any particular issue or problem.
