The Standard & Poor's 500 Index returned 9.6 percent annually over the 50 years through December, with dividends reinvested. A $10 million investment in the index over that period could be worth about $975 million before taxes.

Costs to set up a dynasty trust may range from about $3,000 to more than $30,000, depending on the complexity and attorney's fees, said Adam von Poblitz, head of estate planning at New York-based Citigroup Inc.'s private bank.

Boosting Gifts

While there's no minimum for setting up a dynasty trust, clients with about $20 million or more in assets have expressed the most interest in taking advantage of the full $5 million exemption, said Joan Crain, a family wealth strategist in Fort Lauderdale, Florida, for Bank of New York Mellon Corp.

Some clients increase their gift to the trusts by using the initial contribution to take out a loan, Bertles said. An individual can gift a trust $5 million, for example, then sell the trust $50 million in assets, using the initial $5 million as a down payment. The trust would issue a promissory note to the individual for the remaining $45 million.

The notes are treated as intra-family loans and must follow U.S. Internal Revenue Service rules on repayment and interest rates. As of July, the rates were 2 percent for loans of three to nine years. Any appreciation of the purchased assets above that interest rate pass on to the trust without triggering the gift tax, Bertles said.

Family Businesses

One client used this strategy to transfer partial ownership of the family's growing winery business to his children, Lindley of Northern Trust said. The client funded a trust with $4 million, which it used to purchase a $40 million share of the business, he said.

The strategy is appealing for families with a closely held business because they may be able to sell a portion to the trust at a discount of as much as 40 percent, said Laura Zeigler, a Los Angeles-based senior vice president for Bessemer Trust Co., which provides investment-management and financial-planning services for families with $10 million or more in assets. That's because the stakes might be difficult to sell on the open market.

The trusts are irrevocable, meaning the person starting the trust has minimal control over the assets once it's set up, and generally may change the trust only by going to court or getting approval from all beneficiaries, said BNY Mellon's Crain.