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Huge rise in early inheritance use as cost of living bites

Nick Cheek
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Nick Cheek

A new survey of 200 advice firms has revealed that 91% had clients who already gifted or were planning to gift cash to their children or grandchildren while they were still alive. 

The main reasons for gifting cash were cited as money for a house deposit, education fees, weddings and to assist with the current cost of living crisis.

However, two-thirds of advisers said they would need to challenge their client’s intentions of giving a living inheritance. Almost two-thirds said it was because gifting cash could leave their clients short of income in later life, while 52% said clients did not have enough to give away. More than a third (37%) said their clients had not considered care costs in later life. 

Future care costs ‘a known unknown’

Some advisers thought that the cost of living crisis would reduce the number of clients looking to give a living inheritance, with a quarter saying so. 

Stephen Lowe, group communications director at retirement specialist 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.  

“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.” 

Cap on care costs 

From October 2023, a cap of £86,000 on care costs is expected to be introduced as part of reforms to adult social care. This means people in England will spend no more than that on personal care over their lifetime. 

Research carried out by Just found that 79% of people over 45 had not thought about care, planned for it or spoken to family about it. A quarter said it was because they were too young, while 24% thought it was too depressing to think about. A fifth said it cost too much while a tenth said the system was too confusing. 

Lowe said the reforms needed to go ahead. 

He added: “The cap on care costs has broad support but the devil is in the detail – and it will need to be accompanied by a strong government communications campaign to help people understand their own responsibilities and the point at which the State steps in to help.   

“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 in life.”