Advisers are anticipating a rise in the number of clients giving lump sum cash gifts to adult children amid the cost-of-living crisis, says Just Group.
Research among more than 200 adviser firms for the Just Group Care Report 2022 found that more than four in 10 (42%) thought the price squeeze would lead to an increase in the number of people looking to give a living inheritance in the short term. In contrast, 24% expect the cost-of-living crisis to deter clients from gifting lump sums of cash.
Just Group said 91% of advisers reported having clients who had gifted or were planning to gift cash while they were still alive rather than bequeathing it through their will after death. The main reasons for making gifts were for a housing deposit, education fees, for weddings and to help cope with the rising cost of living.
However, advisers warned that they would need to challenge some clients’ wishes, citing concern about clients being left short of income in later life, not having enough cash to give away or failing to consider care costs in later life.
Stephen Lowe, group communications director at Just Group, said: “Understandably, people want to help their children financially, but advisers have an important role managing their clients’ decisions to hand over cash if it could leave them short in the future.
Lowe said: “Our latest Care Report highlights the reluctance among many over-45s to plan for care and the important role advisers have in opening their eyes. It could lead to some difficult conversations because future care costs are what could be called a ‘known unknown’ that loom large but are currently impossible to quantify.”
Nearly four fifths (79%) of over-45s have not thought about or planned for care, with a quarter (26%) considering themselves too young to think about it and 24% finding it too depressing to think about. Meanwhile, 11% find the costs too much to think about and 9% find it too confusing.
Lowe said that the funding reforms due to be implemented in October 2023 will be a “big step forward”, providing clients with something solid to work with.
Lowe said: “The introduction of the cap on personal care costs is a good opportunity for advisers to talk to clients about potential care needs and costs. It will be important for clients to know that the cap won’t be the limit of what they will be expected to pay because on top will be Daily Living Costs – food, utilities and accommodation in a care home – plus the cost of any extras.”
However, Lowe said the devil will be in the detail and the care cap will need to be accompanied by a government communications campaign to help people understand their own responsibilities.
Lowe added: “The changes could start to shift the country from the current care crisis to a more stable and well-funded system the nation can be proud of. There is an important role for advisers to help people prepare for potential care costs, giving them peace of mind and saving them from what can often be a brutal shock of having to access very expensive professional care later life.”
