Once the children have been selected we need to configure by what criteria children can be included. This is done by clicking the relation icon:

Then we can select under what conditions objects can be considered a child of any given parent:

If the Inside rule is selected, any potential child object that is fully within the boundaries of the parent will be included.

If the Intersecting rule is selected, a child that crosses the boundary of the parent can be included, depending on the amount of overlap between the parent and child candidate, as defined by the Min. Overlap slider.

If the Close rule is selected, potential children can also be included based on the proximity of these objects to potential parents. Note that children can only belong to one parent so if a child is within the max allowed distance of two parents it will be assigned to the closest one.