South Dakota Medicaid Estate Recovery 2026 (Expanded Estate)

South Dakota is an expanded-estate state for Medicaid estate recovery, so jointly held property, life estates, and transfer-on-death accounts are not automatically safe from recovery. After a Medicaid recipient who was 55 or older and received long-term care dies, the South Dakota Department of Social Services (DSS) may recover what Medicaid paid not only from the probate estate but also from assets that pass outside probate, under SDCL 28-6-23 and Administrative Rule 67:48:02:01.1 This makes South Dakota one of the more aggressive recovery states, and it changes the planning math for families.

In This Guide

• The 60-Second Version
• Why South Dakota Medicaid Estate Recovery Reaches Beyond Probate
• Who Is Subject to Recovery
• What DSS Can Recover From: The Asset-by-Asset Walkthrough
• Who Is Protected From Recovery
• The Small-Estate Affidavit
• The Undue-Hardship Waiver
• How to Respond If You Receive a Claim
• Planning Around South Dakota Medicaid Estate Recovery
• Worked Examples
• Common Pitfalls
• Frequently Asked Questions
• Where to Get Help

The 60-Second Version

• Federal law (42 U.S.C. 1396p(b), enacted by OBRA '93) requires every state to recover from the estate of a deceased Medicaid recipient who was 55 or older when they received long-term-care services, or who was permanently institutionalized at any age.2
• Federal law lets a state choose to recover from non-probate assets too, and South Dakota has adopted that expanded definition. The recoverable estate includes assets passing through joint tenancy, tenancy in common, survivorship, life estate, or living trust (ARSD 67:48:02:01).1,2
• Under SDCL 43-46-1, a surviving joint owner is liable for the deceased joint owner's debts, so joint-tenancy property is reachable for recovery.1
• Recovery is deferred, not waived, while a surviving spouse is living or a surviving child is under 21, blind, or permanently disabled. After the spouse dies, DSS may recover against the spouse's estate.1,2
• A properly drafted irrevocable trust funded before the 60-month look-back, in which the recipient kept no legal title or interest, stays outside the recoverable estate.1,3
• When DSS uses the small-estate affidavit, it claims only on estates under $25,000 and only for institutional care. Larger estates are pursued through the probate claim and the expanded-estate rules.1
• Every state must run an undue-hardship waiver process; South Dakota's is administered by DSS.2
• Medicare Savings Program cost-sharing (premiums, deductibles, coinsurance, copays) is carved out of recovery by federal law.4
• The single most consequential mistake in South Dakota is assuming a jointly titled house or a beneficiary account is automatically safe. In an expanded-estate state, it often is not.1

Why South Dakota Medicaid Estate Recovery Reaches Beyond Probate

Medicaid estate recovery is a federal requirement, not a South Dakota invention. Federal law at 42 U.S.C. 1396p(b), enacted by the Omnibus Budget Reconciliation Act of 1993 (OBRA '93), requires every state Medicaid program to seek recovery from the estate of a deceased recipient who was 55 or older when they received nursing facility services, home and community-based services (HCBS), and related hospital and prescription-drug services, and from a recipient of any age who was permanently institutionalized.2

Here is where states diverge. Federal law sets a floor for what counts as the "estate": it must include the probate estate. But it also gives each state the option to expand the estate definition to non-probate assets such as joint tenancy, tenancy in common, survivorship interests, life estates, and living trusts. A state that takes only the floor is a "probate-only" recovery state. A state that takes the option is an "expanded-estate" state.2

South Dakota took the option. South Dakota Administrative Rule 67:48:02:01 defines the recoverable estate as "all real and personal property and other assets included within the individual's estate as defined in SDCL 29A-1-201, and any other real and personal property or other assets in which the individual had any legal title or interest at the time of death, including such assets conveyed to a survivor, heir, or assign of the deceased individual through joint tenancy, tenancy in common, survivorship, life estate, living trust, or other arrangement." That language mirrors the federal expanded-estate option almost word for word.1

Two further South Dakota provisions reinforce the reach:

• SDCL 28-6-23 makes any Medicaid payment for a person 55 or older for nursing facility services, HCBS, intermediate care facility services, hospital, and prescription-drug services "a debt due the Department," and ARSD 67:48:02:05 directs that, once the recipient dies, "the department shall seek to recover from the individual's estate the benefits paid on behalf of the individual."1
• SDCL 43-46-1 provides that when a joint owner dies, "the surviving joint owner or owners shall be liable for the debts and obligations of the deceased joint owner." That is the legal hook that lets DSS reach jointly titled property the surviving co-owner thought was protected.1

The practical takeaway: in South Dakota, the common assumption that "if it avoids probate, it avoids Medicaid" is wrong. The state's estate definition was written specifically to reach beyond probate.1

Who Is Subject to Recovery

South Dakota Medicaid estate recovery applies to recipients who:

1. Were 55 or older when they received Medicaid-covered long-term services, and
2. Received nursing facility care, home and community-based services, intermediate care facility services, or related hospital and prescription-drug services.1,2

It also applies, regardless of age, to a recipient who was permanently institutionalized. A recipient who received only standard Medicaid medical coverage with no long-term-care component, or who received long-term services before turning 55, is not subject to recovery.2,1,4

To qualify for long-term-care Medicaid in the first place, a single applicant's gross income must be at or below $2,982 per month (300% of the 2026 SSI benefit rate), and countable resources must be at or below $2,000. South Dakota is an income-cap state, so an applicant over the income limit must route the excess through a Qualified Income Trust (Miller Trust).3 These are eligibility rules, separate from recovery, but they tell you which families end up facing a recovery claim: those whose loved one needed Medicaid to pay for a nursing home or waiver care.

What DSS Can Recover From: The Asset-by-Asset Walkthrough

Because South Dakota uses the expanded-estate definition, the asset-by-asset picture looks very different from a probate-only state. The general rule: if the recipient held any legal title or interest in the asset at the moment of death, it is within reach, even if the asset passes outside probate, as the table below details.1

The irrevocable-trust line is the key planning distinction. The expanded definition reaches assets "in which the individual had any legal title or interest at the time of death." A properly drafted irrevocable trust, where the recipient is not a trustee and retains no power to revoke, amend, or benefit from the principal, holds property in which the recipient has no remaining interest, so it falls outside the recoverable estate. A revocable living trust or a retained life estate is the opposite: the recipient kept an interest, so DSS can reach it.1

A caution on beneficiary designations. In a probate-only state, a POD/TOD account or a beneficiary-designated IRA is a reliable shield. In South Dakota's expanded-estate framework, do not assume it is. DSS's authority extends to assets conveyed to a survivor or assign through "survivorship, life estate, living trust, or other arrangement." Whether a particular beneficiary-designated account is reached can depend on the asset and the facts, so confirm the treatment of a specific account with DSS or an elder-law attorney rather than assuming it is safe.1

Who Is Protected From Recovery

Federal law and South Dakota rule provide protections that pause or block recovery. These are the genuine shields in an expanded-estate state.

Surviving spouse, minor child, or disabled child (deferral). Under ARSD 67:48:02:05, "the department may not seek recovery from the individual's estate if the individual's spouse is still living or if the individual has a surviving child who is under age 21 or is blind or disabled." This mirrors the federal mandate at 42 U.S.C. 1396p(b)(2).1,2

But read the word carefully: recovery is deferred, not permanently waived. While the spouse is alive, DSS cannot recover. After the surviving spouse dies, ARSD 67:48:02:08 lets the Department recover against the surviving spouse's estate for the resources the spouse received from the recipient. So a couple cannot defeat recovery simply by leaving everything to the surviving spouse; the claim follows the assets.1

Home protection through qualifying residency. Federal law also protects the recipient's former home when certain relatives live there:2

• A sibling who has an equity interest in the home and lived there for at least one year before the recipient was institutionalized.
• An adult caregiver child who lived in the home for at least two years before institutionalization and provided care that delayed the recipient's move to a facility.

Long-term-care partnership reduction. If the recipient owned a qualified South Dakota Long-Term Care Partnership insurance policy, ARSD 67:48:02:05 reduces the recovery by the amount of assets that were disregarded at the time of Medicaid eligibility because of that policy.1

Medicare Savings Program carve-out. Medicaid payments for Medicare cost-sharing (premiums, deductibles, coinsurance, and copays) made for Medicare Savings Program enrollees are excluded from recovery by federal law at 42 U.S.C. 1396p(b)(1)(B)(ii). If a claim includes those amounts, they should be removed.4

The Small-Estate Affidavit

South Dakota's small-estate affidavit is often misunderstood as a $25,000 "protection threshold." It is not. It is a collection mechanism with a ceiling.1

Per the DSS Estate Recovery program, "when using the affidavit process for small estates the Department may only claim on estates less than $25,000.00 and only claim for the payments for nursing home or other medical institutional care on behalf of the decedent." In other words, the affidavit is a streamlined route DSS uses for small estates, and when it uses that route, the claim is limited to estates under $25,000 and to institutional-care costs.1

This does not mean estates of $25,000 or more escape recovery. For larger estates, DSS pursues its claim through the regular probate process and the expanded-estate rules, and there is no automatic small-estate waiver. The $25,000 figure caps the affidavit shortcut, not the state's overall recovery right.1

The Undue-Hardship Waiver

Federal law at 42 U.S.C. 1396p(b)(3) requires every state to establish a process to waive recovery in cases of undue hardship, and South Dakota's DSS administers one.2

The federal framework identifies the situations that typically qualify:

1. The asset is the sole income-producing asset of the surviving family (for example, a working farm or small business).
2. The asset is a homestead of modest value.
3. Other compelling circumstances make recovery inequitable.

To apply, contact DSS Estate Recovery when you respond to the claim and document the hardship with specifics: for a modest homestead, evidence of the home's value relative to area norms; for a sole income-producing asset, evidence that the family depends on it for income and that recovery would eliminate that source. If DSS denies the waiver, you can request a fair hearing under ARSD 67:48:02:07. An elder-law attorney can structure the application and represent the estate on appeal.1

How to Respond If You Receive a Claim

If your family member received long-term-care Medicaid and has died, DSS may present a recovery claim. Work through these steps:

Contact SD DSS Estate Recovery at 605.773.3653 or Recoveries@state.sd.us.1

Planning Around South Dakota Medicaid Estate Recovery

In a probate-only state, the planning playbook is to move assets out of probate. In South Dakota, that playbook largely does not work, because the expanded-estate definition follows assets out of probate. Effective planning therefore looks different.1

1. Irrevocable trusts, funded well ahead of need. The most reliable structure is a properly drafted irrevocable trust in which the recipient retains no title or interest. Because the recipient has no interest at death, the assets are outside the recoverable estate. The trust must be funded before the 60-month look-back to avoid an eligibility transfer penalty, and it must be drafted by elder-law counsel so no retained interest creeps in.1,3

2. The caregiver-child home transfer. Federal law at 42 U.S.C. 1396p(c)(2)(A)(iv) lets a parent transfer the home during life, without a transfer penalty, to an adult child who lived in the home for at least two years immediately before institutionalization and provided care that kept the parent out of a facility. A completed lifetime transfer removes the home from the recipient's estate.4

3. Long-term-care partnership insurance. A qualified South Dakota Long-Term Care Partnership policy both pre-funds care (reducing reliance on Medicaid) and earns a dollar-for-dollar reduction of any later recovery for the assets it allowed the family to protect.1

4. Spend-down with a care strategy. Structured spend-down on the recipient's own care, home repairs, a replacement vehicle, and prepaid burial reduces the estate and the recovery exposure at the same time, within transfer-penalty limits.3

What does not work in South Dakota: simply re-titling the house into joint tenancy with a child, adding a POD beneficiary to the bank account, or moving assets into a revocable living trust. Each of these avoids probate, but none of them removes the recipient's interest, so DSS can still reach the asset. Always plan with an elder-law attorney before transferring anything.1

Worked Example 1: The Jensen Family, Joint-Tenancy Home

This is an illustrative scenario. Margaret Jensen, 81, of Sioux Falls, added her son David to the deed of her home as a joint tenant with right of survivorship in 2022, believing it would keep the house away from Medicaid. She entered a nursing facility in 2023, qualified for Medicaid, and died in 2025.1

• Home: $240,000 fair market value, held in joint tenancy with David1
• Bank account: $9,000, sole name1
• Medicaid paid: roughly $130,000 in nursing facility care1

The mistake: the family assumed the joint-tenancy home was protected because it passed to David outside probate. In a probate-only state, it would have been. In South Dakota, it is not. Under ARSD 67:48:02:01 the recoverable estate includes assets conveyed through joint tenancy, and under SDCL 43-46-1 David, as the surviving joint owner, is liable for Margaret's debt to DSS. The home is within reach.1

Outcome: DSS can pursue recovery against the home's value (up to the Medicaid amount), because no surviving spouse or protected child defers the claim and no hardship applies. Had Margaret instead placed the home in a properly drafted irrevocable trust in 2020, before the look-back, retaining no interest, the result would have been the opposite, and the home would have been outside recovery.1

Worked Example 2: The Hofer Family, Surviving Spouse

This is an illustrative scenario. Walter Hofer, 79, of Aberdeen, entered a nursing facility in 2023 and received Medicaid until his death in 2025. His wife Ruth, 77, survives him. Their home, held jointly, passed to Ruth, along with their joint accounts. Medicaid paid roughly $115,000.1

While Ruth is alive: under ARSD 67:48:02:05, DSS may not seek recovery from Walter's estate because his spouse is still living. The claim is deferred, and Ruth keeps the home and accounts without interference.1

After Ruth dies: under ARSD 67:48:02:08, DSS may recover against Ruth's estate for the resources she received from Walter. So the deferral bought time and protected Ruth for life, but it did not erase the claim. If the family wants the assets to pass to the next generation free of recovery, Ruth should plan during her lifetime (for example, by consulting elder-law counsel about an irrevocable trust funded well ahead of any future need).1

Lesson: spousal deferral is powerful protection during the surviving spouse's life, but in South Dakota it is a deferral, not a permanent escape.1

Common Pitfalls

1. Assuming "avoids probate" means "avoids Medicaid." This is the single biggest South Dakota mistake. The expanded-estate definition was written to reach non-probate transfers.1
2. Re-titling the house into joint tenancy with a child. Joint tenancy does not protect the home; the surviving joint owner is liable under SDCL 43-46-1.1
3. Trusting a revocable living trust to shield assets. A revocable trust keeps the recipient's interest, so DSS can reach it. Only an irrevocable trust with no retained interest works.1
4. Reading the $25,000 affidavit as a protection threshold. It caps the small-estate affidavit shortcut; it does not waive recovery on larger estates.1
5. Treating spousal deferral as permanent. After the surviving spouse dies, DSS may recover against the spouse's estate.1
6. Paying a claim that includes Medicare Savings Program cost-sharing. Those amounts are carved out of recovery; remove them.4
7. Missing the response deadline. Estate-claim notices carry deadlines, and missing one can waive defenses. Calendar the date the notice arrives.
8. Funding an irrevocable trust too late. It must be funded before the 60-month look-back to avoid an eligibility transfer penalty.3
9. Overlooking the home-residency protections. A qualifying sibling or caregiver child living in the home can protect it; document the residency.2
10. Skipping the partnership-policy reduction. If the recipient had a South Dakota Long-Term Care Partnership policy, the claim should be reduced.1

Where to Get Help

If you have questions about South Dakota Medicaid estate recovery, hardship waivers, partnership-policy reductions, or planning options, start with these resources.

Learn More

Find personalized help navigating South Dakota Medicaid estate recovery at brevy.com.

The information on Brevy.com is for educational purposes only and is not a substitute for professional legal, financial, or medical advice. Rules vary by state and program and change frequently. Always verify with the relevant agency or a qualified professional. Brevy is not a law firm, financial advisor, or healthcare provider.