Objective To provide an overview of living arrangements during childhood for children of parents with schizophrenia, bipolar disorder, and depression. Method Information was obtained from Danish registers on children's addresses and used to calculate the proportion living in different household living arrangements. The study was conducted as a prospective, register-based cohort study covering all children in the entire Danish population born after 1982 (N = 1,823,625) and their parents with a diagnosis of schizophrenia, bipolar disorder, depression, or none of these disorders. Regression analyses were performed assessing the risk of dissolution of the conjugal family. Results Children's living arrangements were characterized by fewer nuclear families and more single-parent–headed households when parents had serious mental illness (SMI). From birth, 15% to 20% of children lived with a single mother with SMI. Conjugal families were dissolved at higher rates if a parent had SMI, especially if the mother (incidence rate ratio 2.98; 95% CI 2.80–3.17) or the father (incidence rate ratio 2.60; 95% CI 2.47–2.74) had schizophrenia. Risks for family dissolution varied greatly with parents’ socioeconomic position in all diagnostic groups. Conclusion Parents’ SMI affects children's family living arrangements because fewer children live with both parents and more children live with a single parent or are separated from both parents. Family cohesion seems especially difficult to maintain when parents have schizophrenia.