The biggest financial regrets people make in their 60s and how to avoid them

Many people reach their 60s believing they have plenty of time to organise their finances, only to discover that delaying important decisions can prove costly.

From inheritance tax planning and lifetime gifting to wills, lasting powers of attorney and trusts, some of the biggest financial regrets arise not from making the wrong decision, but from putting decisions off altogether.

Recently, The Telegraph asked Jo Summers, Head of Private Wealth & Tax at Jurit LLP, to share the most common financial regrets she sees among high net worth individuals. Here are her insights.

Don’t delay lifetime gifting

One of the most common regrets I see among people in their 60s is leaving important financial planning too late. Many spend years worrying about making gifts to children or grandchildren, only to realise later that a significant portion of their estate could be lost to inheritance tax that might have been mitigated with earlier planning.

If you make a gift to another individual, there is no immediate charge to inheritance tax (there might be a capital gains tax charge, if you’re giving away an asset rather than cash).

Instead, we wait to see if the person who made the gift survives by seven years.  Once they have survived the gift by at least three years, the potential inheritance tax bill reduces annually. And if they survive the gift by at least seven years, there is no inheritance tax on the gift. I joke with clients to put a bottle of prosecco in the fridge for when they’ve survived 3 years and a bottle of champagne for after surviving 7 years!

The only exclusion to this rule is where the donor hasn’t really given the asset away (the gift with reservation of benefit rules). So, you could receive a gift of £1m from a relative, and if that relative (who made the gift) survives by seven years then you receive that £1m free of tax.  Plus, the donor’s estate is reduced by £1m so there is less inheritance tax to pay when they die.

I’ve had so many clients tell me they are worried they can’t guarantee surviving the 7-year period, so they don’t make the gift.  Then they realise, often 10 years later, that they did survive seven years from when they first thought about doing the gift, but because they didn’t make the gift, the assets are still within their estate and will be subject to inheritance tax when they die.

Not only that, since they are now 10 years older, they are even less likely to survive the seven years or to be able to take out 7-year life insurance to cover the potential tax liability.  The general rule is that the earlier you can make gifts, the better – subject to not giving away too much, of course!

Don’t give away too much

At the other end of the spectrum, some people give away too much, too soon, leaving themselves financially dependent on family members in later life. Striking the right balance between generosity and maintaining your own financial security is crucial.

Don’t leave wills and Lasting Powers of Attorney until it’s too late

Another frequent regret is delaying wills and Lasting Powers of Attorney. These documents are often viewed as something to deal with ‘later’, until an illness or family crisis makes the need urgent. By then, the options can be far more limited.

Think carefully before transferring assets to your children

I also see parents transfer substantial assets, including property, to adult children without considering wider risks. If a child later divorces, those assets can become part of the matrimonial pot, potentially leaving the family wealth exposed.

Be wary of complex tax and trust schemes

Finally, many people regret entering complex tax or trust arrangements that were marketed as solutions to inheritance tax or care fee concerns. In some cases, these schemes fail to achieve their intended purpose and can create unexpected tax complications.

“Good planning is usually straightforward, proportionate and tailored to an individual’s circumstances, rather than relying on overly complicated structures.”

We have seen clients coming to us with complex will and trust arrangements, which they’ve been sold as saving tax and/or protecting their wealth if they need to go into care.

Often these arrangements involve putting the family property into a trust during lifetime, but many people don’t realise there can be an immediate tax charge if you put assets (including your family home) into a trust, depending on the value.

Trusts also pay special tax charges on every 10^th anniversary of the trust’s creation and when assets are appointed out (an exit charge). These points are often not discussed or understood when the planning is put in place.

Separately, many councils have rules that prevent you deliberately getting rid of assets (the deprivation of assets rules) just to avoid paying for care. These rules may allow your local council to ignore the gift or trust arrangement. Also, some care needs are medically tested, not means tested, so it doesn’t matter how much you own. Plus, if you co-own your home (e.g. with a spouse), then the value isn’t taken into account if only one of you needs care.  It is a shame that people are selling schemes that often do not work as expected and/or actually give rise to unexpected tax bills.