The role of family life in the production or prevention of emotional problems in offspring is a contoversial topic. To determine in what ways family competence in childhood might be associated prospectively with freedom from psychiatric symptoms in young adulthood for children at risk, three groups of families from the St. Louis Risk Research Project particpated in a longitutdinal study of family dynamics. The families included 25 families of parents with mental disorders, 10 families of parents with physical illness requiring prolonged hospitalization, and 21 families with non-ill parents. When the children averaged 8 years old, an interview was conducted with the family to rate family competence on 19 variables which were reduced to five factors: conflict, undercontrol, estrangement, father overcontrol, and impoverishment. Offspring were administered the Diagnostic Interview Schedule when they were at least 18 years old. An analysis of the data using structured equation methodology showed that parental illness increased family incompetence and family incompetence in turn increased offspring symptoms. However, only parental mental disorder and offspring symptoms were significantly correlated. The findings indicate that the competent young adult offspring of disturbed parents is competent because the parent's illness did not affect the quality of family functioning, and that symptoms of psychopathology in young adulthood may be related to having lived in a dysfunctional family. (Diagrams of the hypothesis testing models are appended.) (BL)