Baby boomers who wish to pass an inheritance to the next generation must not do so at the expense of their long-term care, a financial adviser has warned.
According to Stuart McLuckie, managing director of Zedra's Manchester office, there are rising concerns about Baby Boomers passing their wealth down to the next generations without making adequate provision for later life.
He said while it was important to think about how to leave an inheritance to loved ones, it was important that money was still earmarked for any potential care needs.
McLuckie said: "As life expectancy has increased, the cost of care in old age is a substantial one, with the wealthier Baby Boomers left to fund old age care themselves, which will diminish what can be passed on to the next generation."
With the Baby Boomer generation (those born between 1946 and 1965) having benefited from the more generous defined benefit pensions, the long-term rise in stock markets and the acceleration in house prices, this decade is set to see this wealth being passed on to Generation X (those born between 1966 and 1976).
He pointed to the fact that national debt has skyrocketed in the last year and, as a result, there are expectations the government will "look to tweak the tax system to increase the tax take from this wealth".
Already there have been reports of a "tax raid" on pensions, but as reported earlier this year, there is a likelihood that there will be changes to inheritance tax, capital gains tax and possibly the introduction of a wealth tax.
Earlier this week, FTAdviser published a feature explaining what any proposed changes to GCT might mean for advised clients.
All this leads to greater need for advice for those late Gen X and Baby Boomer clients, who will have had the advantage of defined benefit pension schemes and been boosted by recent rises in house prices, but will still need to consider "key life planning considerations", McLuckie said.
He said conversations with clients from these generations should centre around:
- How to make sure they have adequate financial resources in retirement and to look after themselves in their own home or if necessary, in an old people’s home or nursing home should the need arise.
- How to ensure that their wishes are followed should they die or become incapable of making decisions due to ill health or an accident.
- How to protect family wealth and pass it on to their family in the most efficient and beneficial way either during their lifetime or at death.
He added: "Deciding how to transfer your wealth can be difficult. However, it is important to do so in order to protect and preserve it for future generations and we believe the first step in anyone’s financial plan should be to ensure they have a Will in place."
simoney.kyriakou@ft.com
