MERP Michigan Medicaid Estate Recovery

The State Can Claim Your Parent's Home — Usually Through Probate

Michigan's Medicaid Estate Recovery Program (MERP) allows the state to recover Medicaid benefits from a deceased beneficiary's estate. Under MCL § 400.112g, MDHHS can file a claim against the probate estate of any Medicaid recipient who was 55 or older and received long-term care services on or after September 30, 2007. The recoverable amount can include Medicaid benefits beyond the nursing-home bill.

The critical detail: in ordinary cases, Michigan's MERP statute limits recovery to the probate estate — assets that are held solely in the deceased person's name at death and must pass through probate court to transfer to heirs. MDHHS says an exception applies when a beneficiary received an asset disregard under a long-term-care partnership policy; in that situation, recovery can reach assets outside probate. Do not treat a non-probate transfer as blanket protection without legal advice.

This distinction is the basis of every legitimate estate protection strategy for Michigan Medicaid families.

What MERP Can and Cannot Reach

Subject to MERP recovery:

• Real property titled solely in the deceased beneficiary's name with no surviving joint owner or transfer-on-death beneficiary
• Bank accounts held solely in the deceased's name without a payable-on-death designation
• Personal property, vehicles, and investments that pass through the probate estate

Outside ordinary probate-based MERP recovery:

• Property held in joint tenancy with rights of survivorship (transfers automatically to the surviving owner)
• Real property conveyed through a Lady Bird Deed (transfers outside probate upon death)
• Assets held in a properly funded irrevocable trust
• Life insurance proceeds payable to a named beneficiary
• Retirement accounts with a named beneficiary
• Bank accounts with payable-on-death designations

These protections are not absolute: MDHHS says an asset disregard under a long-term-care partnership policy can make all assets subject to recovery.

Exemptions That Defer or Block Recovery

Recovery is deferred while any of the following conditions exist:

• A surviving spouse — recovery is deferred until the surviving spouse's death
• A child under age 21 living in the home
• A blind or permanently disabled child of any age living in the home
• A survivor who lived in the home for at least two years before the parent entered a medical facility and whose care allowed the parent to remain at home (the "caretaker" exemption)
• A sibling with an equity interest in the home who lived there for at least one year before the parent entered a medical facility
• Undue hardship — if recovery would force a surviving family member onto public assistance or deprive them of housing, the family can petition MDHHS for a hardship waiver

If none of these protections apply and the home passes through probate, MDHHS may file a claim for the amount of Medicaid benefits subject to recovery.

The Lady Bird Deed: Michigan's Primary Protection Tool

A Lady Bird Deed — formally an Enhanced Life Estate Deed — is the most widely used MERP protection instrument in Michigan. It works by creating a "remainder interest" that transfers the property to named beneficiaries automatically upon the owner's death, without going through probate.

The parent retains full ownership during their lifetime: the right to live in the home, sell it, mortgage it, or revoke the deed entirely. Unlike a standard life estate deed, a Lady Bird Deed does not require the remaindermen's (beneficiaries') consent for any of these actions.

Because the property ordinarily never enters the probate estate, it can be outside the ordinary MERP claim. Because the parent retains full control during their lifetime, a Lady Bird Deed may also avoid a transfer penalty, but the deed and the family's Medicaid facts should be reviewed by a Michigan elder-law attorney.

A Lady Bird Deed should be drafted by a Michigan attorney familiar with both real estate and Medicaid law. The deed must be properly recorded with the county Register of Deeds to be effective.

Irrevocable Trusts: Stronger but Less Flexible

An irrevocable trust removes assets from both the probate estate and the grantor's personal control. Property held in a properly structured and funded irrevocable trust may be outside ordinary probate-based MERP recovery.

The trade-off: transferring assets into an irrevocable trust during the 60-month look-back period triggers a Medicaid divestment penalty. The penalty period is calculated by dividing the value of transferred assets by the 2026 divisor of $12,216.30 per month. During the penalty period, Medicaid will not pay for nursing facility care.

Irrevocable trusts are most effective when established well before a Medicaid application is anticipated — ideally more than five years in advance.

What Families Get Wrong

Waiting until after the Medicaid application. Once your parent is receiving Medicaid-funded long-term care, the window for most estate planning strategies has closed. A Michigan attorney should confirm whether a Lady Bird Deed fits the parent's current Medicaid facts; irrevocable trusts and most other tools that involve giving up control of assets can trigger look-back penalties.

Adding a child as joint owner. While joint tenancy may keep the property outside ordinary probate-based MERP recovery, adding a child as a co-owner during the look-back period can be classified as a partial transfer of assets — triggering a divestment penalty. It also exposes the property to the child's creditors, divorce proceedings, or lawsuits.

Assuming the home is always exempt. The primary home is exempt from countable assets during the Medicaid beneficiary's lifetime (up to $752,000 in equity in 2026), but this exemption does not survive death. Without a non-probate transfer mechanism in place, the home enters the probate estate and may become a MERP target.

The Hospital-to-Home in Michigan guide includes a chapter on MERP and estate protection with a side-by-side comparison of Lady Bird Deeds, irrevocable trusts, and other non-probate tools, along with the questions to bring to an elder law attorney consultation.

See more Michigan guides →