Hey there, I was experimenting a lot and did some math and found a great solution to this problem. I even did a Tutorial how to change the tessellation lod of your object based on your distance towards the object:
I hope this helps. The material is driven by 6 parameters -> 3 for World Displacement and 3 for Tesselation Multiplier. You can set up the base value (maximum depth, maximum iterations) and then the minimum and maximum distance. The minimum distance is the distance from the object, where the set tesselation value (depth or iterations) stays the same. Then from the minimum towards the maximum distance it transitions towards 0.Greetings,
Dave
PS: I also just added an unreal engine wiki page: