Can a Nursing Home Take Your Austin Home if It's in a Trust?

Many Texas homeowners facing the prospect of nursing home care ask the same urgent question: can a nursing home take your house if it is in a trust? The fear is real and understandable, especially when a nursing home stay in the Austin area can cost $5,500 to $7,500 per month or more. The short answer is that a nursing home itself cannot seize your home, but the State of Texas can pursue reimbursement through the Medicaid Estate Recovery Program (MERP) after your death. Whether your trust actually protects your house depends entirely on the type of trust you have, and most families are surprised to learn that their standard trust may offer no protection at all. In this guide, Kyle Robbins and the team at Robbins Estate Law discuss how different trust structures affect your home's exposure to nursing home costs and Texas Medicaid recovery.

Key Takeaways

• A revocable living trust does NOT protect your home from Medicaid spend-down or MERP estate recovery because you still control the asset and Texas Medicaid counts it as yours.
• An irrevocable Medicaid Asset Protection Trust (MAPT) can shield the home, but only if it was funded more than five years before you apply for Medicaid.
• Texas MERP is the real threat, not the nursing home itself. After a Medicaid recipient dies, the state can file a claim against their probate assets, including a home that passed through the estate.
• The Lady Bird Deed is the most commonly used Texas tool for protecting a homestead from MERP without triggering the five-year look-back period.
• Texas Tax Code § 11.13(j) preserves your homestead property tax exemption and school tax freeze, while Texas Property Code § 41.0021 preserves your creditor protection, when your home is held in a qualifying trust.

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Can a Revocable Trust Stop a Nursing Home from Taking Your House?

This is where most Austin families discover they have a planning gap. A revocable living trust is the most common trust used in estate planning, and it is excellent for avoiding probate and managing assets during incapacity. However, it provides zero protection against nursing home costs or MERP.

The reason is straightforward. Because you retain full control over a revocable trust, you can cancel it, change beneficiaries, or pull the house back out at any time. For this reason, Texas Medicaid treats the assets as if they still belong to you directly. Under federal Medicaid rules and Texas's implementation through the Texas Health and Human Services Commission (HHSC), a revocable trust is transparent for asset-counting purposes. The home counts as your resource when determining Medicaid eligibility.

While a revocable trust avoids probate (the only arena where MERP can assert claims under Texas's probate-only recovery rules), placing a home in a revocable trust causes it to lose its exempt homestead status and become a countable resource under Texas MEPD Handbook § F-3210. To qualify for Medicaid, you must first remove the home from the trust and retitle it in your individual name, which ultimately leaves the home exposed to probate—and subject to MERP recovery—at your death.

"One of the most consistent gaps I see in long-term care planning is a family who created a revocable trust years ago and genuinely believes they are protected. The trust is a wonderful probate-avoidance tool, but it was never designed to be a Medicaid shield. Those are two different legal problems." — Kyle Robbins, Estate Planning Attorney

Using an Irrevocable Trust So a Nursing Home Can't Take Your House

An irrevocable Medicaid Asset Protection Trust (MAPT) is a different instrument entirely. When you transfer your home into a properly structured MAPT, you give up legal ownership and control. You cannot revoke the trust, pull the home back out, or sell it without the trustee's action. Because you no longer own the asset, Texas Medicaid cannot count it against you once the look-back period has passed.

The critical rule is the five-year Medicaid look-back period. Federal law requires Texas HHSC to review all asset transfers made within the five years before a Medicaid application. If you transferred your home to a MAPT within that window, HHSC will impose a penalty period during which Medicaid will not pay for your nursing home care. The penalty length is calculated by dividing the value of the transferred home by the average monthly private-pay nursing home rate for the region. An Austin home worth $450,000 could create a penalty period of several years.

The planning strategy, therefore, requires acting well before a crisis. Families who transfer the home to a MAPT when they are healthy and the need for nursing home care is years away have the strongest protection.

What About the Texas Homestead Exemption?

A common concern is whether transferring a home into any trust eliminates the homestead tax exemption or the school-tax freeze for seniors. Under Texas Property Code § 41.0021, a qualifying trust preserves your homestead's protection from creditors and forced sales, while Texas Tax Code § 11.13(j) preserves your property tax homestead exemption and senior school-tax freeze. To retain both protections, the trust instrument must be drafted as a 'qualifying trust' under both statutes, which requires specific language confirming the settlor or beneficiary has the right to use and occupy the home rent-free and without charge. A Texas trust administration attorney Texas can draft or review the trust language to confirm these protections are preserved.

Texas Tools for Protecting Your Home: A Comparison

If your current trust doesn't offer protection, what can you do? Texas offers several powerful planning tools, and each one works differently. It is important to know your options.

Lady Bird Deed (Enhanced Life Estate Deed)

The Lady Bird Deed is the most widely used Texas tool for protecting a homestead from MERP without triggering the five-year look-back. Here is how it works: you retain full ownership and control of your home during your lifetime, including the right to sell it. At death, the property transfers automatically to your named beneficiaries outside of probate. Because Texas has a "probate-only" rule for MERP, assets passing outside of probate are legally shielded from recovery. This makes the Lady Bird Deed a highly effective and flexible tool.

Transfer on Death Deed (TODD)

Texas adopted the Transfer on Death Deed in 2015. Like a Lady Bird Deed, a TODD transfers real property at death without probate and avoids MERP claims. The key differences involve flexibility and how creditor claims are handled. Both tools can be effective, and the right choice depends on your specific family and financial circumstances.

Medicaid Asset Protection Trust (MAPT)

As described above, a MAPT removes the home from your countable assets but requires the five-year look-back period to pass. This tool is most appropriate for individuals who are healthy, have a family history of long-term care needs, and want broader asset protection beyond just the homestead.

Here is a quick comparison of the three primary options:

• Lady Bird Deed: No look-back issue, homestead stays in your control, avoids MERP, no probate. Best for homestead protection when timing is uncertain.
• TODD: Similar to a Lady Bird Deed; works well for simpler situations with slightly different legal mechanics.
• MAPT: Strongest protection for multiple assets including the home, but requires five-plus years of lead time. No control over the asset once transferred.

What If the Five-Year Window Has Already Passed?

Many families only start planning when a parent has already entered a nursing home or is about to. At this point, the MAPT option is likely off the table because a transfer would trigger a penalty period. However, several other options may still be available.

Depending on the specific facts of your situation, you may be able to use:

• Spousal Protection Rules: If a spouse still lives in the home, Texas Medicaid generally exempts the home from estate recovery as long as the community spouse is alive. The home is considered an exempt asset for eligibility purposes.
• Texas MERP Hardship Waiver: Texas HHSC has a formal hardship waiver process. If estate recovery would deprive a surviving dependent of their primary residence, a waiver application can be filed.
• Caregiver Child Exception: If an adult child lived in the home and provided care that delayed institutionalization for at least two years before the nursing home admission, Medicaid rules may allow a transfer of the home to that child without a penalty.
• Lady Bird Deed Executed After Admission: Because a Lady Bird Deed is not a completed gift for Medicaid purposes, it may still be a viable option even after a person enters a nursing home. A Texas attorney should review the facts before any deed is executed.

"When families contact us after a parent has already entered a nursing home, we are not out of options, but we are working with fewer of them. The most important thing is to get a clear picture of the facts before any assets move. The wrong step at that stage can create a penalty period that delays Medicaid coverage for months." — Kyle Robbins, Estate Planning Attorney

Why Choose Robbins Estate Law for Long-Term Care and Trust Planning

Medicaid planning in Texas sits at the intersection of federal eligibility rules, Texas HHSC policies, MERP procedures, and Texas trust law. Robbins Estate Law has worked with Austin-area families navigating all of these layers, including situations involving Austin's high real estate values, which can compound the MERP penalty period calculation. The firm's experience with trust administration and comprehensive estate planning means your strategy addresses the full picture, not just one piece of it.

You can review Kyle Robbins's professional background on his Super Lawyers profile and see additional attorney information on FindLaw.

Robbins Estate Law serves families across Texas with a commitment to clarity and protection:

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If you need help evaluating whether your current trust protects your home, schedule a free consultation with Kyle Robbins today. Call (512) 599-9856 or visit our website to get started — no obligation, no pressure.

This article is for informational purposes only and does not constitute legal advice. For guidance specific to your situation, consult a licensed Texas attorney.