It is clearly not a bug, it is logical functionality. Some may not like it, but that how it is work. Higher tie titles start in gavekin.
This is not correct, unfortunately. Higher tier titles do not automatically start in gavelkind. What is currently the case from my experience is that upon creation of a new king title, primogeniture and seniority carry over, but elective does not (the law reverts to gavelkind). That might be WAD, might be a bug.
Case in point: a week ago, I formed the kingdom of Bohemia while my law (as duke of Bohemia and Moravia) was Seniority. The kingdom law was Seniority as well. I know this for a fact because even before creating the king title I wanted to become an elective kingdom, so I kept an eye on the law both before and after creation of the king title. It carried over.
Yesterday, I formed the kingdom of Bohemia again (new game) while my law (as duke of Bohemia and Moravia) was Elective. I changed it before creating the king title, hoping it would carry over as well. After creation, the kingdom law suddenly became gavelkind... Much to my surprise and annoyance, as you might imagine. The duke of Bohemia in 1066, Vratislav (II) usually has many kids over the course of his life. Yesterday, he had five (adult) sons and four daughters.
In my (humble) opinion, the logical thing would be if upon creation of a new title, it either always reverts to gavelkind, or it always carries over the law from the previous level. The last option seems like the most logical to me. Now primogeniture (per a previous poster) and seniority do carry over, but elective does not. It doesn't say this anywhere on tooltips, however - you basically have to find this out for yourself during the game. Which can be a bit frustrating if you find this out with a newly-created 70-year old king. :/
I was in the same situation yesterday. Old Vratislav Premysl was about 65 years old when he became king, and probably (from previous experiences) wouldn't have lasted another decade. As luck (or lack thereof) would have it, he croaked
less than a year before the law could be changed (rule as king: nine years and three months), but thankfully the realm and his demesne were left intact to his eldest son because I'd shipped the rest off to the monastery in the meantime. *cackle*
If I'd known before that it'd revert to gavelkind, however, I would have waited until after creation of the king title to try and switch to elective. At least I would have kept seniority that way.