Expanded Estate Recovery South Dakota SDCL 28-6-23
What Makes South Dakota Different
Federal law requires every state to recover Medicaid costs from the estates of recipients age 55 or older who received nursing home care, HCBS waiver services, or related hospital and prescription drug benefits. Most states limit this recovery to the probate estate — assets that pass through the court-supervised probate process after death.
South Dakota goes further. Under SDCL 28-6-23, all Medicaid payments for long-term care recipients age 55 or older become a debt due to the Department of Social Services. And under ARSD 67:48:02:01, the state defines the recoverable estate to include any real or personal property in which the deceased had any legal title or interest at the time of death — not just probate assets.
This expanded definition reaches:
- Joint tenancies — Under SDCL 43-46-1, a surviving joint owner is liable for the debts of the deceased joint owner. A home held in joint tenancy with an adult child does not escape recovery just because it passes automatically to the survivor.
- Life estates — The parent retained a legal interest until death, so the life estate value is subject to recovery regardless of who holds the remainder interest.
- Revocable living trusts — Assets in a revocable trust are considered part of the grantor's estate because the grantor maintained control during their lifetime.
- Transfer-on-death (TOD) and payable-on-death (POD) accounts — These designations avoid probate, but DSS can still pursue the funds because the deceased held a legal interest in the account until the moment of death.
What DSS Cannot Reach
The expanded estate recovery has limits. Assets that the deceased had no legal interest in at the time of death — meaning ownership was fully and irrevocably transferred during life — are not recoverable. Specifically:
- A properly funded irrevocable trust (such as a Medicaid Asset Protection Trust) where the grantor retained no power to revoke, amend, or benefit from the trust. If the trust was funded outside the 60-month lookback window, the assets are beyond both the lookback penalty and estate recovery.
- Assets fully transferred to another person (by outright gift or sale at fair market value) more than 60 months before the Medicaid application — and where no interest was retained. A completed, unconditional transfer removes the parent's legal interest entirely.
- Assets protected by the caregiver child exception — a home transferred to a qualifying adult child without a retained life estate.
When Recovery Must Be Deferred
Even under expanded recovery, DSS cannot act immediately in every case. Recovery must be deferred while:
- A surviving spouse is alive, regardless of where they live or their financial situation
- A minor child (under 18) of the deceased is alive
- A blind or disabled child of the deceased is alive, regardless of age
Once these conditions no longer apply — typically after the surviving spouse dies — DSS can file a claim under the estate-recovery rules.
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How the Claim Works in Practice
After the Medicaid recipient dies, DSS files a claim against the estate or contacts the holders of non-probate assets directly. For probate estates, the claim is filed through the standard creditor claim process in circuit court. For non-probate assets — joint accounts, TOD accounts, life estates — DSS may contact the surviving joint owner or beneficiary directly to assert the debt.
The amount DSS can recover is capped at the total Medicaid expenditures for the deceased's care. If Medicaid paid $200,000 over four years of nursing home care and the deceased's recoverable estate is worth $150,000, DSS can take $150,000 — not more. If the estate is worth $300,000, DSS takes $200,000 and the remainder passes to the heirs.
Families can ask DSS about an undue-hardship waiver or other limitation on recovery; the application requirements should be confirmed directly with the Department.
The Planning Implications
South Dakota's expanded recovery means that many of the probate-avoidance strategies families rely on in other states — joint tenancy, TOD deeds, revocable living trusts — do not protect assets from Medicaid recovery here. Families who set up these arrangements assuming they would shield the home or savings are often surprised to learn that DSS can and does pursue these assets after death.
The strategies that work in South Dakota are more restrictive and require more lead time. An irrevocable MAPT needs five years to clear the lookback. The caregiver child exception requires two years of in-home caregiving and careful documentation. Even a simple strategy like a burial trust only shelters up to $15,000 per person.
Understanding the full scope of what DSS can recover — and when — is the starting point for any asset protection conversation. The South Dakota Medicaid Long-Term Care & Asset Protection Guide maps the expanded recovery rules against each available strategy, so families can see which approach fits their assets, their timeline, and their family structure.
Get Your Free South Dakota — Medicaid Long-Term Care Eligibility Checklist
Download the South Dakota — Medicaid Long-Term Care Eligibility Checklist — a printable guide with checklists, scripts, and action plans you can start using today.