The US has its own tax havens onshore — with South Dakota, dubbed the “Bermuda of the prairies”, holding more than $120 billion in trusts for wealthy Americans.

The state altered its tax laws to end the duration of a trust to the lifetime of a living heir — creating “dynasty trusts” that run forever and avoid federal estate taxes, levied on estates at the death of the owners.

And — in the past four years alone — that has contributed to a tripling of money administered by South Dakota trust funds, almost all of it from outside the state.

In addition, South Dakota, unlike Idaho and Wisconsin, which have similar trust systems, has no state income taxes, shielding cash from state taxes elsewhere.

Delaware, Alaska, as well as other states including Nevada and New Hampshire, have since introduced similar legislation to allow perpetual trusts.

Edward McCaffrey, a professor at the university of Southern California’s Gould School of Law, said that states like South Dakota are “creating laws that are conducive to a massive exploitation of a federal tax loophole”.

He added: “We have a tax haven in our midst.”

Among the super-rich with trusts in South Dakota, some located in a former five and dime store, are a branch of the Pritzker family, which owns the Hyatt hotel chain, the Carlson family that controls Radisson hotels and TGI Fridays and the Wrigley family, heirs to the candy and chewing gum fortune.

Bernie Hunhoff, minority Democratic leader South Dakota state legislature, said that members of the state House were aware that the trust industry drained money away from the US Treasury.

He added: “There’s a bit of irony there, if not hypocrisy. Anything we can do to poke the federal government in the eye, or to help anybody, even wealthy strangers from 1000 miles away, avoid taxes, that seems to be a popular thing out here.”

And Mr Hunhoff said: “If we don’t provide for these kinds of trusts here, this will happen in some other state, so we might as well try to get the activity here.

“If we can find opportunity for a few dozen young lawyers. I guess I’ll set my philosophical concerns aside.”

Pierce H McDowell, president of South Dakota Trust Co, one of the largest firms of its type in the state, said in 1993 that $1 million invested in a dynasty trust in South Dakota, earning 12 percent a year, would grow to $1.9 billion on 85 years, compared to $488 million if the trust was located in New York and subject to both state income taxes and the federal estate tax when it expired.