As Ben Barden said, this varies by storyteller. The Chronicles of Darkness: Mage: The Awakening includes a "sanctity of merits" rule which essentially says that if a player pays starting-dots or experience for a merit and the story removes the merit, then the experience or dots are refunded and may be spent again.

But if that was ever formalized in the original World of Darkness or Mage the Ascension I am unaware of it.

My approach varies slightly from Ben's when I am the storyteller. A player may spend experience during downtime to acquire any merit they want and create any, or even no, background for how they got the merit. If the story then removes that merit at a later time, the experience is refunded.

Merits that are acquired during play are valid without spending experience and may be freely used. However, the player normally must overcome some challenge to get that merit and it may come with consequences. The merit dots also will not be refunded if it is later lost.

As Ben Barden said, this varies by storyteller. The Chronicles of Darkness: Mage: The Awakening includes a "sanctity of merits" rule which essentially says that if a player pays starting-dots or experience for a merit and the story removes the merit, then the experience or dots are refunded and may be spent again.

But if that was ever formalized in the original World of Darkness or Mage the Ascension I am unaware of it.

My approach varies slightly from Ben's when I am the storyteller. A player may spend experience during downtime to acquire any merit they want and create any, or even no, background for how they got the merit. If the story then removes that merit at a later time, the experience is refunded.

Merits that are acquired during play are valid without spending experience and may be freely used. However, the player normally must overcome some challenge to get that merit and it may come with consequences. The merit dots also will not be refunded if it is later lost.