The cost of living crisis is likely to increase the number of clients seeking to give lump sum cash gifts to their adult children, new research from Just Group has suggested.

Findings among more than 200 adviser firms revealed that over two in five (42%) advisers thought the rising living costs would increase the number of clients looking to give a living inheritance in the short-term.

By contrast, 24% believed the cost of living crisis would decrease the number of their clients looking to give a living inheritance.

According to Just Group’s research, the vast majority of advisers (91%) 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 the gifts were for a housing deposit, education fees, for weddings and to help with rising living costs.

However, two-thirds of those advisers said they would need to challenge some client wishes. The key reasons for challenging clients were because the gift could leave them short of income in later life (64%), because they don’t have enough to give away (52%), or because they had not considered care costs in later life (37%).

Group communications director at Just Group, Stephen Lowe, 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.”

Lowe added that the funding reforms due to be implemented in England in October 2023 are a “big step forward”, due with the £86,000 cap on care costs giving people something solid to work with.

“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,” said Lowe. “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.

“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.”

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