(Art by Brian Stauffer.)

Place, who belongs to the inheritors’ education and advocacy group Heirs, then began assessing his legal rights to the estate. His confusion represents a common problem, according to Heirs founder Standish Smith. "Our experience is, if families don’t sit down and discuss this openly, it’s a recipe for dissension later," he says.

Family discord frequently accompanies generation-skipping trusts (GSTs), which literally pass over a generation of heirs. Estate planning remains full of thorny issues, but few are as perilous as those behind GSTs. Designed to ensure that assets will be reserved for future generations, GSTs often also say something about the parent-child relationship. They are increasingly popular as a way to keep money from a child’s spouse in case of divorce or to keep money from a child whose choices—from career selection to drug use—upset the wealth holder. Some families use this type of trust to protect property from an estate-tax hit, which the IRS can levy when each generation inherits money from the trust. However, GSTs of this sort do not carry the same sort of emotional burden because their primary aim is to save taxes, rather than exclude family members.

GSTs hold appeal for families whose net worth exceeds $100 million. Tax savings multiply exponentially with each generation that avoids the estate levy. At this level of wealth, when parents skip their children in favor of grandchildren, their children rarely suffer financial hardship. The children usually have sufficient means of their own, or are already beneficiaries of grantor-retained annuity trusts, according to Jonathan Forster, an estate attorney and comanaging partner with the Tysons Corner, Va.–based firm of Greenberg Traurig. "For the superwealthy, parents figure they have already done enough for their children," Forster says.

GSTs are increasingly popular as a way to keep money from a child’s spouse in the event of divorce.

While some see grantors of these trusts as control freaks, as estate planning tools GSTs provide peace of mind to those worried their assets could be diverted away from the family. These trusts offer numerous protections—not just from taxes, but from creditors as well. "You leave assets to your kids, and 10 years later, they get a divorce," says Armond Budish, a partner with Beachwood, Ohio–based Budish, Solomon, Steiner & Peck and author of Why Wills Won’t Work (If You Want to Protect Your Assets): Safeguard Your Estate for the Ones You Really Love. "Nobody wants to picture the money they left to a child paying for an extravagant lifestyle for an estranged son- or daughter-in-law." Such fear can prompt many families to establish GST bloodline trusts, Budish says. Still, he finds these kinds of trusts can often create family friction.

This type of estate planning can also lead to messy complications and unintended consequences. One of Forster’s clients, whom he declined to name, received an annual $4 million income as a beneficiary of a GST. He and his wife spent it all on a lavish lifestyle. Neither earned outside salaries and they lacked the financial incentive to find careers or to continue to build their assets. But when the husband died relatively young—in his 50s—it transformed his widow’s life; her income stopped and their three children became the beneficiaries. "She’s permanently reliant on her children, and there’s confusion about how this happened," Forster says.

In retrospect, the husband could have easily avoided this financial crisis by purchasing life insurance. Instead, the children now give their mother money at the maximum allowable gift rate of $12,500 a year. But this reversal of fortune and their mother’s reliance on her children led to new challenges, because her children and their spouses feel that she and her husband, despite knowing the eventual outcome of the GST, squandered enormous assets when they should have been living conservatively.