"Their grandchild is your cousin."
Translation:Cucu mereka adalah sepupu kamu.
There's no really a rule. But, mostly when you describe something using another thing or noun (not adjective), it's best to include 'adalah'. In this sentence, we are describing 'their grandchild'.
Another example in using 'adalah' in describing thing :
This person is a teacher. Orang ini adalah guru.
But, if you describe the thing with adjective, you don't need 'adalah'. Example :
This person is smart. Orang ini pandai.
BUT, as I said before, there is no rule. In many occasions (mostly when speaking informally) you can omit 'adalah' when describing thing and Indonesian still understand the meaning. So you can say 'orang ini guru' in informally speaking.