Sask. rules on death benefits

The Court of Appeal for Saskatchewan, has ruled that when determining death benefits under the province's Automobile Accident Insurance Act, Saskatchewan's government auto insurer, SGI, has to use the same accounting method for calculating income as the deceased.

The decision was to determine whether the income of a self-employed farmer, Roger Howard Schmitz, who died in an auto accident on Apr. 4, 1999, should be based on an accrual method of accounting, or a cash method of accounting.

Under the cash method, income is not considered income until a cheque or cash is received. Expenses are not considered as an expense, until paid. The accrual method differs, in that transactions are counted as income, when the order is placed, the services occur, or the item is delivered, regardless of when the money for them (considered to be receivables), is actually paid or received.

In Saskatchewan Government Insurance v. Schmitz, the difference between the two methods was between an annual income of $41,964 for Schmitz (using the accrual method) or $33,790 (the cash method used by SGI).

The widow, Terry-Lynn Schmitz, held to the belief that SGI should have used the accrual method, to get the accurate picture of the deceased's farm income. The trial judge agreed.

When the case was brought before the Appeal Court, it was noted that Schmitz, with the consent of Revenue Canada, used the cash method for determining his income.

Part of the decision was based on Saskatchewan's legislation not specifying, which accounting method should be used in calculating a deceased's income.

"SGI, when faced with such claims, must start somewhere in determining a deceased's income, and the logical place to start is the deceased tax returns for the relevant period, and to calculate the income using the same method as by the deceased," the Court of Appeal ruled.

Since Schmitz used the cash method, then the income is determined as $33,790.