"He's publicly out as a gay man and trans to everyone who knows him personally," he said. "He has certain ideas especially that people have gender roles and how people should be and what society dictates, and he goes against that."
The Beattys have three other children: Benjamin, 16; Isabel, 14; and Ella, 11. They attend Buckley, the Sherman Oaks private school where Stephen had a particularly hard time until he transferred to the more accepting Arete Preparatory Academy in Los Angeles, according to Schiffer.
Buckley is a traditional school that caters to more of the "Beverly Hills 90210" crowd, according to his friend. Celebrity children like Kimberly Stewart, daughter of Rod, and Paris and Nicky Hilton are alumni. Arete caters to gifted children and those who don't fit into a conventional setting, he said.
During his high school years, Beatty's classmates supported him "150 percent," said Schiffer, but he still had some social issues.
"The hardest thing that I observed was getting people to accept him for who he is," Schiffer said.
Transgender youth face high levels of victimization in school, even more so than their lesbian, gay and bisexual peers, according to recent studies.
"It's been really rough for him -- not just [at] Buckley, but having a family that much in the limelight," Schiffer said. "His father is Warren Beatty. The National Enquirer said his dad was furious with him. No. His dad is a really supporting guy. But his dad comes from a different time and it's hard to grasp a daughter not being a daughter anymore, but a son.
"He loves Stephen and has not threatened to kick him out of the house," said Schiffer. "They've had their problems, but he's a good guy."
In Chaz Bono's book, "Family Outing," he reported that his gay-icon mother was "'uncomfortable" with his sexuality and went "ballistic" before finally accepting him.
Transgender youth, in particular, are at disproportionate risk for depression, suicide, substance abuse, HIV and sexually transmitted diseases, according to the Family Acceptance Project.
Their study revealed that lesbian, gay, bisexual and transgender children have happier and less risky lives when parents support them, according to Caitlin Ryan, a clinical social work and director of the project.
GLSEN Director of Communications Daryl Presgraves said the fact that Beatty is the son of famous parents offers "hope to other youth."
"It's extremely important to be able to identify with a celebrity and see someone like them," he said.
"When you are a young person and you see someone like Chaz Bono and the Bening-Beatty son publicly identify as transgender, it makes it so much easier to realize that [it's] not something that has to be so isolating -- there are people out there like you," said Presgraves.
"That kind of visibility offers hope to transgender or gender nonconforming young people and encourages them to live openly and honestly."
"For young people, visibility of other transgender people provides a hopeful prospect that they too can live an authentic life and be afforded the kind of respect and equality that everyone deserves in our society."
Freelance writer Courtney L. Sexton contributed to this report.