Billionaire heirs are getting richer than entrepreneurs as old money prevails amid IPO chill

Advertisement
Billionaire heirs are getting richer than entrepreneurs as old money prevails amid IPO chill
Jeremy Strong, Sarah Snook, and Kieran Culkin on season four of "Succession."Claudette Barius/HBO
  • This year's new billionaires got more riches from inheritance than entrepreneurship, per UBS.
  • This is the first time the Swiss bank has found this discrepancy in nine years of research.
Advertisement

You can't take it with you. But that doesn't stop billionaires from hoarding their wealth for the next generation — or the 20th.

This past year, new billionaires accrued more wealth from inheritance than entrepreneurship, according to a new report by UBS. The global study, covering 12 months to April 2023, found that 53 new billionaires inherited a total of $150.8 billion, topping the $140.7 billion generated by 84 new self-made billionaires. As for American billionaires, heirs reported an average net worth of $2.2 billion, topping billionaire entrepreneurs by $700 million.

This discrepancy represents the beginning of the Great Wealth Transfer, according to the Swiss bank, which estimates more than 1,000 billionaires will pass $5.2 trillion to heirs over the next 20 to 30 years. It's also a symptom of the slowdown in initial public offerings, limiting some entrepreneurs from cashing in on the value of their businesses. Before the market cooldown, IPOs minted at least 60 new billionaires in 2021 alone, per Forbes.

The uber-wealthy have many tools at their disposal to bestow more money to heirs and pay less to the government. American taxpayers, for instance, can set up trusts that last as long as 1,000 years, shield the assets from creditors, and only incur the federal estate tax of 40% once. Anything from stocks to yachts can be passed estate-tax-free through offshore life insurance policies. As for wealthy parents who want to save big on expiring tax breaks but keep access to their assets, they can have their cake and eat it too by stashing assets in trusts for their spouses.

These dynasties will likely compound their riches with more heirs caring about wealth preservation than philanthropic impact, according to UBS's survey. Sixty percent of heirs cited passing their riches onto future generations as a top priority, while only 32% selected charitable giving and making an impact on society. A similar percentage of first-generation billionaires listed wealth preservation as a main goal, but a higher proportion (68%) also chose philanthropy.

Advertisement

Thanks to the US tax code, billionaires don't have to choose. They can use trusts to parlay their philanthropy into guaranteed income for life and tax savings.

{{}}