Detailed Answer

When an estate goes through probate in South Dakota, accurate recording of third-party claims and payments is critical. Third-party claims can include creditor claims (medical bills, credit cards, vendor invoices), lienor payments (health insurers, Medicare, or subrogated insurers), and payments made directly to creditors by third parties. Accurate records protect the personal representative from personal liability, keep beneficiaries informed, and help the probate court confirm correct distribution.

Key Legal Framework (South Dakota)

South Dakota administers probate under the Uniform Probate Code adopted in SDCL Title 29A. Procedures for notifying creditors, presenting and allowing claims, and how the personal representative must handle estate assets appear in SDCL Title 29A. For an overview of the statute text, see the South Dakota Codified Laws, Title 29A: SDCL Title 29A (Probate). The claims and creditor notice procedures are found in the decedent’s estate provisions (see, for example, the claims/creditors sections of Chapter 29A-3): SDCL 29A-3-803 (creditor notice and claims).

Step-by-step process to ensure accurate recording

1. Open and maintain a dedicated estate account.

   Deposit all estate receipts into a separate estate bank account. Never commingle personal funds with estate funds. Use the estate account for every payment and receipt so bank records provide a primary audit trail.

2. Record and document every third-party claim on receipt.

   When a creditor submits a claim or a third party reports a payment, create an intake record that includes: creditor name, claim amount, claim date, basis for the claim, supporting invoices or contracts, and the person who submitted the claim. Keep copies (paper or PDF) of all supporting documents.

3. Follow South Dakota notice and claim procedures.

   Make sure the personal representative complies with statutory notice and claim-filing rules in SDCL Title 29A. These rules control deadlines and how claims are presented and allowed. If you don’t follow statutory procedures you risk claims being deemed allowed or barred; consult the specific provisions in SDCL Title 29A for precise deadlines and methods: SDCL Title 29A.

4. When a third party pays a creditor, obtain written evidence.

   If a third party (insurer, Medicare, family member, etc.) pays a creditor directly, obtain from the creditor and/or payer: (a) a receipt or ledger entry showing the payment, (b) a statement applying the payment to the estate claim, and (c) a signed release or satisfaction of that claim to prevent duplicate payment. Attach the documents to the estate accounting.

5. Update the estate accounting immediately.

   Reflect any third-party payment as an offset against the relevant claim in the estate’s ledger and in any periodic accountings filed with the court. Clearly show original claim amount, payments from the estate, payments from third parties, and remaining balance. Keep the math and references transparent so the judge and beneficiaries can verify entries.

6. File inventories and accountings with supporting documentation.

   When you file the inventory and subsequent accountings with the probate court, attach or be prepared to produce supporting invoices, receipts, bank statements, and releases. The court uses these records to approve distributions and to confirm that the personal representative properly handled claims and third-party payments. See SDCL Title 29A for filing and accounting duties: SDCL Title 29A.

7. Get releases from creditors when a payment satisfies a claim.

   When a claim is fully paid — whether by the estate, a third party, or both — secure a written release or satisfaction from the creditor. File that release in the probate record. A creditor’s signed release is the best way to avoid later disputes and duplicate claims.

8. Handle subrogation, liens, and government payers carefully.

   Some third parties (health plans, Medicare) may have a statutory or contractual right to reimbursement or a lien. Confirm the payer’s legal status before you apply a payment against a claim. If a medical provider receives a payment from an insurer, coordinate documentation so that the estate’s records reflect whether any subrogation interest or lien remains. Consider court approval when resolving complex lien or subrogation claims.

9. If you dispute a claim, follow the probate dispute process.

   If a claim is disputed, document the dispute, withhold payment pending resolution if allowed, and follow South Dakota procedures to contest the claim in probate. Keep all dispute correspondence in the estate file so your accounting shows why a claim remained unpaid or was paid subject to reservation.

10. Obtain court approval for large or unusual disbursements.

    If you plan to accept a settlement, compromise a claim, or pay an unusual third-party obligation, ask the probate court to authorize the transaction. Court approval gives extra protection to the personal representative and creates a clear public record of the payment and its purpose.

Practical recordkeeping checklist

• Establish an estate-only bank account and preserve monthly bank statements.
• Keep a claim ledger that lists: claim ID, creditor, original amount, receipts, third-party payments, release date, and reference to supporting documents.
• Scan and save PDFs of all invoices, contracts, receipts, bank cancellations, and releases in a secure folder.
• Number and cross-reference documents (e.g., “Claim #3 — Invoice 04/2024 — Receipt 06/2024”).
• When possible, obtain a creditor’s signed acknowledgment when a third-party payment partially or fully satisfies a claim.

Sample hypothetical illustrating best practices

Hypothetical: The estate receives a $10,000 medical invoice from Hospital A. An insurer later pays Hospital A $6,000 directly. The personal representative should:

1. Record the original $10,000 claim and attach Hospital A’s invoice.
2. Obtain documentation from Hospital A showing the $6,000 payment from the insurer and a remaining balance of $4,000, or obtain a signed satisfaction showing whether the insurer’s payment fully or partially satisfied the claim.
3. Update the estate ledger to show a $6,000 third-party payment and a $4,000 remaining estate obligation (or $0 if fully satisfied).
4. If the personal representative pays the remaining $4,000 from the estate, obtain a release for the final payment and file it with the probate court as part of the accountings.

When to get professional help

If claims involve large sums, government payers (Medicare/Medicaid), unclear releases, or lien/subrogation issues, consult a probate attorney. Court approval may be necessary for settlements or compromises. An attorney can also help prepare accountings that meet South Dakota’s probate clerk and judge expectations and can reduce personal liability.

Disclaimer

This article explains general principles of South Dakota probate practice and recordkeeping. It is educational only and not legal advice. For advice on a specific estate, contact a licensed South Dakota probate attorney.

Helpful Hints

• Keep everything in writing. Oral agreements and payments cause later disputes.
• Use clear naming conventions for documents so court filings and accountants can follow the trail.
• Attach receipts and releases to accountings filed with the probate court to reduce later challenges.
• Hold back distributions to beneficiaries until creditor claims and third-party payments are reconciled.
• When a creditor is paid by a third party, get a signed release from the creditor showing how the payment applied to the estate claim.
• If you are unsure about statutory deadlines for creditor notices or claims, check SDCL Title 29A (Probate law) or consult an attorney: https://sdlegislature.gov/Statutes/Codified_Laws/DisplayTitle.aspx?Title=29A.