IFAs challenging clients on living inheritances despite care cost bite

Clients' failure to consider how long they will live and the likely need to pay for care are driving IFAs to feel they must challenge clients about giving living inheritances, according to Just Group.

The firm's ‘Social Care - A Decade in Review' report - published today (18 October) - found almost two-thirds (64%) of advisers believe their clients have not fully considered how long they might live and therefore need an income for.

More than half (52%) of advisers also told Just Group they felt their clients do not have enough money to give away while 37% said their clients have not considered how they might fund care in later life.

Parallel to this, the report found one in four men are expected to live to age 92 and one if four women to age 94. Wealthier people are also likely to live longer than the average person, it noted.

"With people often unwilling to talk about care with their families, it falls on financial advisers to factor it in as part of their clients' overall later life financial planning such as retirement income, wills and powers of attorney, potentially even funeral planning," the report stated.

"Most advisers believe having the ‘care conversation' with clients and their family - however difficult - will save money and stress later."

This is especially vital given very few people seek the help of a professional financial adviser on care planning, the report found.

"Where care costs have been budgeted for in advance, more options exist in terms of starting to receive care earlier or securing a higher standard of support, delivering quality of life benefits," it stated. "Gifting money while still alive can save inheritance-tax later."

However, the report found many advisers recognise that the gifts "only make sense if the clients has sufficient assets to fall back on should they need care later".

One in five clients have already given money, advisers told Just Group, and 26% confirmed they are actively planning to do so.

In about one in five cases where clients have given money away or are planning to, the adviser said they needed to challenge the decision for the reasons above.