The Rise of the Heir: Why More American Businesses Are Now Inherited Rather Than Bought

For decades, the narrative of American business was defined by the self-made entrepreneur—the ambitious outsider buying up existing enterprises or building new ones from scratch. But a profound structural shift is underway in the landscape of American wealth. As the nation’s aging business owners prepare to step down, a growing share of closely held companies are being passed down to heirs rather than sold to outside buyers, signaling the rise of a new era of dynastic stewardship.

According to Bank of America’s recent Private Bank Study of Wealthy Americans, the share of businesses inherited among wealthy Americans is projected to reach 23% by 2026, compared to just 11% that are purchased. This represents a dramatic reversal from just a few years ago. In 2022, BofA data showed that 28% of businesses were purchased, while a mere 5% were inherited. To capture this shifting dynamic, researchers surveyed 1,400 U.S. adults with at least $3 million in investable assets, focusing specifically on how high-net-worth individuals navigate the complexities of wealth accumulation and generational transition.

This shift is a key component of the Great Wealth Transfer, an unprecedented demographic event in which Baby Boomers and older generations are projected to pass down between $36 trillion and $124 trillion in assets over the next two decades. Because wealth accumulation in the United States is highly concentrated at the very top, the decisions made by these high-net-worth families will have a disproportionate impact on the broader economy. How these assets—particularly operating businesses—change hands offers crucial insight into the structural evolution of American capitalism.

Jonathan Parker, a professor of financial economics at the MIT Sloan School of Management, notes that the way businesses transition between generations can illuminate broader macroeconomic patterns. To Parker, the rising share of inherited businesses is a clear symptom of deepening wealth concentration—a trend that has fueled intense debate over economic inequality and the emergence of a highly polarized, K-shaped economy, where affluent households continue to build substantial asset cushions while lower-income families struggle with basic affordability.

The scale of this concentration is stark. Data from the Federal Reserve Bank of St. Louis reveals that the top 1% of U.S. households control nearly one-third of the nation’s total wealth—equivalent to roughly $44 trillion, or as much as the bottom 90% of American households combined.

“We have a lot of business creation in the U.S.,” Parker told Fortune. “That’s generally a very good thing, and that does tend to generate top skewed wealth distribution for the owners, obviously, who have a lot of resources. An interesting question going forward is, what share of that wealth, when people reach the end of their lives, do they bequeath to their dependents?”

Historically, economists observed an inverse relationship between wealth and family size: wealthier individuals tended to have fewer children, a demographic trend dating back to the Industrial Revolution. While the drivers of this phenomenon remain a subject of academic debate, its mathematical impact on wealth concentration is straightforward. When a family’s fortune is divided among one or two heirs rather than five or six, the capital remains highly concentrated, accelerating the consolidation of economic power within a smaller circle of families.

Beyond demographics, the trend toward business inheritance is closely tied to structural changes in the financial markets, particularly the tendency of companies to remain private for much longer. Selling a private business or taking it public has become a more complex proposition. Torsten Slok, chief economist at Apollo Global Management, recently highlighted this shift by citing data from economist and “Mr. IPO” Jay Ritter. Their research points to a steady rise in the median age of companies going public since 2022, the year the Federal Reserve embarked on an aggressive campaign of interest rate hikes to combat inflation.

As public market valuations fluctuated and the cost of capital rose, a massive wave of private capital stepped in to fill the void. The explosive growth of venture capital and private equity has allowed large-scale firms to raise billions of dollars privately, bypassing the regulatory burdens, quarterly earnings pressures, and disclosure requirements of public stock exchanges. For family-owned businesses, this abundance of private capital means there is less pressure to seek an exit through an initial public offering (IPO) or an outright sale, making it easier to keep the business within the family.

However, the shift toward keeping businesses in the family is also heavily driven by the U.S. tax code, which currently offers powerful incentives for affluent owners to hold onto their assets until death.

“We currently have a very strange situation,” Parker said, pointing to the federal estate tax framework. Over the past quarter-century, the U.S. has steadily overhauled its estate tax system, most recently raising the individual lifetime exemption to a historic $15 million under the One Big Beautiful Bill Act. At the same time, the tax code has preserved the step-up in basis on capital gains at death. This provision allows heirs to inherit an asset and reset its tax basis to its fair market value at the time of the benefactor’s death, effectively wiping out any capital gains tax liability on decades of asset appreciation.

“It’s sort of like a tax benefit, a giveaway of taxes to people who pass it on to heirs, rather than the reverse,” Parker noted.

These generous tax provisions create a strong incentive for aging founders to retain ownership of their companies rather than selling them during their lifetimes, which would trigger immediate, heavy capital gains taxes. By holding onto the business and passing it down, they maximize the net wealth transferred to the next generation.

While Bank of America’s study did not specify exactly how long founders are retaining their assets, the report noted that a “notable portion” of business owners have no immediate plans to transition out of their day-to-day operations. Furthermore, the vast majority of respondents indicated that they ultimately plan to transfer or sell ownership to family heirs when the time comes.

“That might be partly why people are holding on to these businesses for longer, and then handing them down to the heirs,” Parker said. “And the heirs can then either make them public or sell them or keep them.”