Family Firms Face a Handover Moment as Gen Z Steps In

Family businesses generate an estimated $7.7 trillion of U.S. gross domestic product and employ nearly 60% of private-sector workers, according to the Conway Center for Family Business. Yet just 34% of owners report having a formal succession plan, even as 72% say they want the business to stay in the family, PwC's 2023 U.S. Family Business Survey found.

The gap is coming to a head. About half of small business owners are over age 50, and Baby Boomers and Gen X owners are eager to lock in transitions before retirement, Empower reports. At the same time, their children are showing up: the share of young adult children under age 30 working for their family's business rose 13% in January 2025 compared with a year earlier, according to a study of 400,000 payrolls by HR technology platform Gusto.

The economics are unforgiving. Only about 30% of family enterprises transition to the next generation, and just 12% make it to a third generation, Conway Center data show.

The stakes played out publicly in the Murdoch family's $3.3 billion trust restructuring, reported by The New York Times in September 2025, which cemented Lachlan Murdoch's control of Fox Corp. and News Corp. and compensated three of Rupert Murdoch's other children after a prolonged succession battle fought in the courts.

Smaller businesses are not immune. Whether it is a media empire or a family-run diner, disputes over inheritance and leadership can emerge for myriad personal and business reasons, Harvard Business Review noted in a 2022 analysis.

Why succession stumbles

The PwC survey exposes a communication problem inside family firms. While 64% of family members regularly talk about the business, only 49% said the family is aligned on company direction. Owners often delay formal planning because they fear it will raise tensions between relatives, according to the World Economic Forum.

The friction points are structural. Business strategy and vision, digital transformation and other technological changes, and perceptions about customer reactions are among the issues that arise during leadership shifts, Deloitte's 2024 Family Enterprise Survey found.

Generational tension compounds the risk. Founders may hesitate to relinquish control, while next-generation leaders might feel disempowered or excluded from decision-making, HBR reports.

Gen Z brings confidence but thin experience. The generation is the most optimistic about reaching its goals, at 71%, according to Empower research, but gaps in training remain, and family dynamics can create blind spots.

Observers recommend that heirs co-design the transition, giving both generations clarity and confidence. A written plan with clearly designated roles, timelines and contingencies for unexpected events is equally important, HBR advises.

Tax clarity may unlock decisions

Many small businesses delayed succession decisions while waiting for clarity on tax policy, NJBIZ reported in July 2025. The One Big Beautiful Bill Act, enacted that month, may have ended the wait.

The law permanently raised the federal estate, gift and generation-skipping transfer tax exemption to $15 million per individual and $30 million for married couples. Without the change, the $14 million exemption in effect for 2025 was due to drop to roughly $7 million next year, The Wall Street Journal reported.

The law also made the 20% qualified business income deduction permanent, with no expiration date. The deduction was created in 2017 so that pass-through entities — sole proprietorships, partnerships and S corporations, which comprise the majority of small businesses — were not at a competitive disadvantage to corporations after their tax rate fell from 34% to 21%, according to the U.S. Chamber of Commerce.

The permanence allows owners to design trusts, buy-sell agreements and other succession vehicles with greater certainty than before, BizBuySell notes. Other provisions — on the sale of qualified small business stock, bonus depreciation and expensing for property and equipment purchases — can make business transfers or sales more affordable, the Chamber says.

What owners should do now

The Small Business Administration advises assembling a team of advisers: an attorney, wealth planner, business valuation professional, and an accountant or tax specialist.

On the family side, succession falters most often when conversations are delayed. With a permanent $15 million exemption, a permanent QBI deduction and a rising generation already on the payroll, the practical barriers to formal planning are lower than they have been in years — and the demographic clock keeps running for owners over 50.