The Kendall Roy Era Is Nigh: Massive Wealth Transfer to Create Nation of Trust Fund Billionaires

At this very moment, the U.S. is readying for a quiet transfer of wealth from rich parents to their children unlike anything the world has ever experienced. 

Nowhere will this be more intensely felt over the coming decades than at the highest echelons of society. To use a metaphor from HBO's Succession, the aging Logan Roys of the world are beginning to hand their billions—and with it, their enormous societal power—to their failson Kendalls, creating a new powerful class of trust fund billionaires.

Last week, we received evidence that the long-anticipated “great wealth handover” is now not only “underway,” but “gathering momentum,” in the form of a report released by the European financial firm UBS, which tracks the going-ons of the world’s newest billionaires. Among last year’s newly minted members of the billionaire class were 84 people who could arguably  be considered “self-made,” for example, by starting their own company. Together, they were worth an estimated $140.7 billion.

That works out to an average of $1.67 billion per head, which, while impressive, is substantially less than the $150.8 billion that 53 heirs-turned-billionaires inherited from their families. 

UBS said this marked a turning point: the first time since UBS started tracking the super-rich almost a decade ago that “new billionaires acquired greater wealth through inheritance than entrepreneurship.” 

It's possible that last year was a bit of an outlier. The financial markets have been an uninspired place recently, and the IPO market in particular—a typical way for Mark Zuckerberg types to turn their theoretical wealth into hard cash—has been atypically cool. 

But it is just as likely the beginning of a fundamental restructuring of the makeup of the upper-class. 

According to the head of UBS’ Private Wealth Management division, the average billionaire is now 69 years old and beginning to take offloading their vast fortunes more seriously. Over the next 30 years, these aging billionaires are expected to pass along $5.2 trillion to their heirs. The billionaire class is one part, although an admittedly large one, of a broader story. Older Americans will reportedly hand down $16 trillion to their heirs over the next decade and $84 trillion by 2045. According to the research firm Cerulli, about half of that will come from the top 1.5 percent richest householders.

Chuck Collins, who sits on the board of Patriotic Millionaires, an organization made up of high net worth individuals that advocate for the rich to pay more in taxes, said the report was evidence that the U.S., which houses a significant percentage of the global billionaire class, is starting to more closely resemble monarchies and societies with more traditional aristocratic systems than a democratic meritocracy.

“We're entering the era of inherited wealth dynasties,” said Chuck Collins. “These are folks who are delinking from the rest of society.”

Collins understands the potential ramifications of the transfer better than most. He is the great-grandson of the famous meatpacker Oscar Mayer, and he decided to give away his fortune early on and pursue a career focused on combating economic inequality in the U.S.  Now, as wealth continues to transfer from the rich to their children, Collins expects them to obtain a “compounding advantage” that makes it harder for everyone else to catch up.

“We're seeing considerable power flow down a narrow bloodline,” he said. 

The oncoming transfer of money from the billionaires of the next of kin could reshape the country, creating an influential class generation of trust fund kids whose political and economic power comes only from their gumption, but their surname. In Collins’ own experience, such people often invest more time and energy into what he described as “wealth defense” than anything else, a claim backed up by survey data in the UBS report, which found that only 32 percent of the heirs said their main objective was to make a positive “impact on the world,” through philanthropy or otherwise, compared to 68 percent of the self-made class. 

Thomas Piketty, an influential French economist who studies wealth inequality, told Motherboard in an email that the report likely underestimated the total inherited wealth of billionaire heirs, in part because “inheritors do not want be publicly known to the outside world quite as much as first-generation billionaires, and in addition they are hard to spot because they tend to have more diversified and less visible portfolios.”

The broader question is what does society gain from a global structure in which so many trillions can be passed down from one billionaire generation to the next? When U.S. President Teddy Roosevelt originally called for the country to enact a tax on large estates in 1906, at the tail end of The Gilded Age, he noted there was a natural “desire on the part of the breadwinner to leave his children well off,” which helped institute a natural work ethic. 

But, he argued, that desire did not outweigh the desire of creating a society in which people felt the need to contribute productively, which is why he saw the “prime object” of such a tax as “to put a constantly increasing burden on the inheritance of those swollen fortunes which it is certainly of no benefit to this country to perpetuate.”

If that was the goal, then the estate tax as it currently exists has been a failure, able to be bypassed and walked over through creative tactics, clever accountants, and innovative financial instruments. Technically, the federal government levies a 40 percent estate tax on fortunes over $12.9 million—or $26 million for married couples—but, according to The New York Times, the richest Americans will likely only pay about $4.2 trillion in taxes on the $30 trillion they plan to pass down through 2045, an effective tax rate of 14 percent. 

“For the ultra-rich, the estate tax has become optional,” Collins said.

The ultra-rich exited the 2010s much richer than they entered it. The billionaire class alone increased its total wealth from $2.4 trillion in 2009 to $8.7 trillion a decade later, and the people right below them did almost as well by some measures. 

The growing fortunes of the 2010s led to an “explosion in creativeness” when it came to estate planning, said Chayce Horton, who works on the wealth management team at Cerulli. In many ways, Horton said, Americans are currently living through the “golden age for estate planning and leniency around taxes” domestically, so much so that he has started to see the wealthy “re-shore” their money from places like Switzerland or the Cayman Islands. Why wouldn’t they? The tax “leniency” the rich used to search out abroad is now available in states like South Dakota and Nevada, he said.  

Last year, Americans for Tax Fairness, an advocacy organization, warned in a report that wealthy Americans' growing ability to avoid taxes as they transferred their wealth over to their children had already “played an outsized role in our return to Gilded Age levels of wealth concentration.” Of particular use have been trusts, which Horton of Cerulli has said has become an “increasingly popular” vehicle of the rich over the last decade. 

Collins expressed disappointment that the estate tax system had become so “weak” and “porous” as to be “unable to even capture a tiny portion of this wealth transfer.” 

Once the money is deposited in the account, it’s pretty hard for the rest of society to get it out, especially if the Kendalls sit around and enjoy their riches. As Morris Pearl, a former managing director at BlackRock who now chairs the Patriotic Millionaires, joked to The Times earlier this year, “the basic way to save on taxes is to not have any income.” (Notably, Pearl established trust funds for his own two sons worth millions.) 

Gabriel Zucman, a French economist who studies tax havens and growing worldwide wealth inequality, said the report was evidence of the need to implement a global annual tax on not income, but wealth. Zucman and a team of other economists recently proposed a 2 percent annual tax on billionaire wealth.

“We should not wait for 20-30 years to try to tax global billionaires, we need to do it now,” he wrote in an email to Motherboard.