Delaware is one of several states, along with New Jersey and Pennsylvania, that allow so-called perpetuities, or trusts that may never expire, Lindley said. It's also an appealing state because it's easier to modify existing trusts there, said James Bertles, managing director of New York-based Tiedemann Wealth Management, which oversees more than $6 billion on behalf of families with $20 million or more. Delaware allows trusts greater flexibility to invest in certain assets, such as hedge funds and private equity, he said.

The state also offers stronger protections from creditors and civil litigation, including divorce proceedings, said Ted Cronin, chief executive officer of Manchester, Vermont-based Manchester Capital Management, which directs $1.9 billion and provides tax- and estate-planning services for families with $25 million or more in assets.

"In effect, it acts as a prenup," Cronin said.

Most Delaware trusts set up by out-of-state residents don't owe state income or capital-gains taxes on accumulations within the trust, and pay these taxes only when distributions are made, Bertles said. Some states do tax the undistributed gains and income of dynasty trusts set up by residents, including Pennsylvania and Illinois, according to Glenmede's Howard. The trusts owe federal income and capital-gains taxes on distributed and undistributed investment gains and income.

$100 Million Gift

Dynasty trusts have gained popularity since 1986 when Congress overhauled the generation-skipping transfer tax and since then several states, including Delaware, have eliminated their rules against perpetuities. In New York, by comparison, trusts may last no longer than the lifetimes of people currently alive, plus 21 years, said Bertles, who's based in Palm Beach, Florida. Connecticut allows for the greater of 90 years or current lives plus 21 years.

Thomasson said his Carmel, Indiana-based business, which provides investment-management and financial-planning services to families with $5 million or more, has been growing at a double-digit pace in recent years. Assuming that continues, and assuming he lives until 80, his trust could provide more than $100 million for heirs by the time he dies, when the shares would be redeemed.

"With the whimsical nature of the minds we have in Washington D.C., whenever you get an opportunity to do something from a tax standpoint, you really need to consider taking advantage of it," Thomasson said.

Potential Growth

A dynasty trust funded with $10 million from a couple today could be worth as much as $184 million in 50 years, assuming no intergenerational transfer taxes and a 6 percent annual return, and before subtracting any federal income or capital-gains taxes paid on the trust's investment returns. By comparison, assets not placed in a trust and taxed twice as an estate in that period could be worth $39 million at the end of 50 years, assuming a $1 million exemption and 55 percent top rate.