Children don't always have to be happy, they can have the same complex emotions as adults do.

When it comes to illness or death, don't lie to them, explain with a few simple words. Don't be afraid to comfort them and be there for them, because they're capable of comforting you even more if you let them.
I know of children whose parent was about to die and up until the last minute the adults wouldn't admit that to them. What if they want to be there for their parents as much as possible and say the last words? What if the shock is far worse now?
If you don't want them lying to you, or acting like immature spoiled brats, then you should start being truthful towards them first.