If the estate-planning issues are not effectively dealt with before the death of a parent, then the real issues will begin, said Adria Starkey, chief operating officer of The Sanibel Captiva Trust Co. in Florida.
Rock-solid estate planning typically helps avoid heated money battles. But material possessions, like family homes, are another story. The kids buy little colored stickers and start putting them around the house immediately, Starkey noted.
Sibling rivalry—from the biblical battle between Cain and Abel to Tyrion Lannister and his sister Cersei on the TV show "Game of Thrones"—is enshrined in human life because it is a basic biological, evolutionary process.
Attorney Mark Accettura, author of the book "Blood & Money: Why Families Fight Over Inheritance and What To Do About It," said siblings have historically been pitted against each other for resources, but the fight at root is over love, and money is only a symptom of the primal kinship psychology.
"The amount of money inherited has no affect on the acrimony," Accettura said, because unresolved issues can go back to the sandbox. "Who is more loved? Who is in charge?"
Accettura gives this example. After one wealthy mother died, her two daughters fought over her silver set. Accettura resolved the conflict by dividing the set equally. "But they ended up fighting over the box," he said. "The silver set merely symbolized feeling safe and special. It's a security blanket."
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The most conflicted families use money as a way to manipulate the kids, said Michael Sampson, a wealth advisor at JPMorgan in Minneapolis, adding, "These families associate access to money with love."
Breeding entitled kids is another pitfall to avoid. Large future inheritances can encourage enabling behavior, said Rachele Cawaring Bouchand, director of financial planning at Clark Nuber in Bellevue, Wash.
One family with a net worth of $30 million was enabling a struggling, entrepreneurial son. The mother had loaned the son $2.5 million, bailing him out over and over. Bouchand advocates documenting all loans for inheritance reasons. And she added, "It's OK to let kids fail."
In Silicon Valley, wealthy parents aren't handing their kids blank checks. Parents fear transferring too much wealth and spawning a generation of trust fund babies, said Jim Cody, director of estate and trust services at Harris myCFO.
Instead, some parents are adopting Warren Buffett's playbook: setting up foundations that teach kids how to handle money responsibly. "These foundations can hold the family together," Starkey said, "because the family must hold quarterly meetings and make decisions."
These days, you don't even need to be superwealthy to start a family foundation: Families with less than $10 million can start one that only gives away, say, $50,000 per year.
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Another method to bond the family is putting together a letter of wishes. Sampson said it's a family mission statement that is included in a long-term irrevocable trust, and it tells descendants how the wealth was created and what they should think about it.
The letter keeps the family stories alive so that kids feel they're part of something bigger when wealth is four generations removed.
Clear wills and equitable trusts that aren't overly controlling can smooth ruffled gilded feathers. Trusts are tough to break, and wealth transfers also happen more quickly with them. "Trusts and wills help prevent family litigation later," Accettura said.
Also, kids usually don't receive distributions at once. They're usually doled out in thirds at increasingly older ages.
Another key to harmony is not controlling kids from the grave. Trusts that tie money to future achievement, such as getting higher grades or earning more money, typically fail. "They can fuel lots of resentments about being controlled," said Sampson.
Accentura agreed. He doesn't believe in passing down one trust in any form for many generations. His solution: rethinking wealth distribution every generation.
"If you make future generations too secure, you'll deprive them of the ability to make their own mark," he adds, and creating wooden standards makes inheritance issues harder. Kids have to grow into their own adulthood—silver spoon or not, Accentura said.
Candid family meetings about family wealth can help smooth over anxieties inherent in this drawn out, complicated process. The team of advisors—accountants, lawyers and wealth advisors—are usually invited too. Having these discussions is healthy, Cody said, adding, "If issues aren't addressed, all hell can break loose later."
It's a familial form of hell breaking loose that Bill Gates and Warren Buffett are avoiding, at all costs, in fact, at a cost running into the tens of billions of dollars of wealth their kids won't be getting.
_ By Constance Gustke, Special to CNBC.com
