The idea of bequeathing a huge pot of money to multiple generations of your family has long been controversial. Warren Buffett, the world's third-richest man, has derided it as "the enemy of a meritocracy." But this approach to wills and trusts is suddenly getting more popular, thanks to a recent change in tax law.

The 2010 Tax Relief Act, which passed in December, made it possible to fund $5 million-plus trusts without incurring as big a tax bill as in the past. That's encouraging the creation of large "dynasty trusts," or trusts for the benefit of multiple generations.

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"Dynasty trusts have been a favored strategy for quite some time, but we are finding that with the law changes there is excitement about the possibility of funding to them to a larger level," says Janine Racanelli, managing director and head of the Advice Lab at JPMorgan Private Bank.

The tax law helped by raising the exemptions for the gift tax and the generation-skipping tax, a levy generally applied when wealth is transferred to relatives who are two or more generations below the donor.

The exemption for each of those taxes was raised to $5 million, or $10 million for couples, for 2011 and 2012. In 2012, both exemptions are further adjusted for inflation.

The previous exemptions were much more restrictive, making it more costly to fund trusts large enough to benefit descendants well down the road.

The gift-tax exemption was just $1 million a person until late in December. So the maximum sum that a couple could place in a trust without incurring a tax was $2 million As for the generation-skipping tax, or GST, it was set at $3.5 million a person and $7 million per couple.

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"Those two numbers really limited what you could do in terms of dynasty trusts without having to pay any tax," says Steven Lavner, senior vice president in the National Wealth Strategies group of U.S. Trust, Bank of America Private Wealth Management.

"Because of this dramatic increase in both the gift and GST exemptions, individuals will be able to create dynasty trusts in greater amounts free of tax," Lavner says.

Couples who have not used up any of their gift or GST tax exemptions stand to get the biggest bang for the buck: They can now shelter $10 million from transfer taxes for several generations.

The key to a trust's longevity is that it must be located in a jurisdiction that does not limit how long a trust can last. Roughly half the states have such favorable laws, including Delaware, Alaska, Florida, New Jersey and Nevada.

Some of the favorable states have no restrictions at all on the length of trusts, while Florida has a 360-year limit -- finite but hardly strict.

"Clients really begin to understand that when I point out that 360 years ago there was no United States, and the European Enlightenment was still 150 years away," says Thomas O. Katz, partner at Katz Baskies in Boca Raton, Fla.

There have been some rumblings that Washington might eventually place limits on the length of dynasty trusts, perhaps imposing a GST every 90 years or so. But no such law is yet in sight.

"If one of these trusts is set up in a jurisdiction that doesn't have a rule against perpetuities, and if the federal law is not changed on this point, there will never be a transfer tax imposed on these trusts," says Carlyn McCaffrey, partner and chair of Weil, Gotshal & Manges' estate-planning practice group.

Moreover, if the trust is drafted as a grantor trust, the creator of the trust -- not the trust itself -- pays the income tax while he or she is alive. "What that means is that the dynasty trust itself can grow and compound essentially free of tax," says Katz.

The increased gift-tax exemption, meanwhile, can be put to great use in establishing the grantor trust. Here's a popular approach: The initial funding of the trust, known as "seed capital," is used in part to purchase from the grantor an asset expected to appreciate in value, such as an interest in a closely held business or real estate, or a stake in a company that may become subject to a public offering. The rule of thumb in the estate-planning world is that the asset can't be worth more than than 10 times the seed money.

In exchange, the grantor receives a promissory note, which the trust pays off with the cash flow of the asset. The grantor pays no capital-gains tax, and the trust is left with a valuable asset and potential gains.

Say a couple that had not used up any of their gift or GST exemption had "seeded" a dynasty trust with $10 million. The trust could then purchase an asset worth $100 million in exchange for a promissory note. Any appreciation above the interest rate on the note would remain in the trust for the benefit of the heirs.

Estate planners urge action on dynasty trusts sooner rather than later. The sooner you get assets out of your taxable estate and into a trust, the better off both you and your heirs will be.

There's also political uncertainty about the exemptions. "We don't know if the $5 million amount will be permanent," says Lavner. With Washington hunting for ways to close the nation's huge budget deficit, anything is possible.

In 2013, in fact, the gift exemption is scheduled to revert to $1 million while the GST exemption will go to about $1.4 million after it is adjusted for inflation.

It all suggests that now is the time to get going on creating a dynasty trust. Warren Buffett might not approve of showering your distant heirs with money, but for the moment, at least, Uncle Sam is giving a thumbs up.