A bit more constructive if you decide to tell the truth:
Say the design is 'not as professional as it could be' - could do a mockup to tempt them or try reminding them that it represents their business. Show them designs their competitors have got (the nice ones).
Say the code is shit if it is. Tell them word is a word processor and not suited to professional level web design. Tell them (a tiny bit) about web standards - the benefits that is, usual stuff.
Say its quicker (and cheaper?) for you to rebuild it than to integrate and it'll save money in the future. If they're worried about money, give them a quote so they know what they're agreeing to. And tell them clean code will help their search ranking, which it should. They'll probably love that.