A dynasty trust is a trust

Trust law

In common law legal systems, a trust is a relationship whereby property is held by one party for the benefit of another...

 designed to avoid or minimize estate taxes

Estate tax in the United States

The estate tax in the United States is a tax imposed on the transfer of the "taxable estate" of a deceased person, whether such property is transferred via a will, according to the state laws of intestacy or otherwise made as an incident of the death of the owner, such as a transfer of property...

 being applied to great family wealth with each transfer to subsequent generations. By holding assets in the trust and making well-defined distributions to each generation, the entire wealth of the trust is not subject to estate taxes with the passage of each generation.

Dynasty trusts in the United States are the combined result of the imposition of the generation-skipping transfer tax

Generation-skipping transfer tax

The U.S. Generation-skipping transfer tax imposes a tax on both outright gifts and transfers in trust to or for the benefit of unrelated persons who are more than 37.5 years younger than the donor or to related persons more than one generation younger than the donor, such as grandchildren...

 upon trusts that attempted to bypass transferring all assets to children, and the repeal of the rule against perpetuities

Rule against perpetuities

The common law rule against perpetuities forbids some future interests that may not vest within the time permitted; the rule "limit[s] the testator's power to earmark gifts for remote descendants"...

by states attempting to attract the great wealth of such trusts.