The ruling also applies to special kinds of grantor trusts, such as a generation-skipping trust, which is designed to avoid taxes at the grantor's children's deaths, as well as a grantor-retained annuity trust, where the grantor can transfer any amount of property betting that it will grow faster than the payments he is required to receive back from the trust over a period of years.

FORBES: The IRS Grants A Wish

Most states limit the generation-skipping aspect of dynasty trusts to great-grandchildren--who must dissolve the trust and pay estate taxes on the principal--though there is a movement to allow family trusts to continue in perpetuity.

FORBES: An Estate Plan Worthy Of Scrooge