He was a natural son of King Valdemar II of Denmark by an unknown mistress.
As a result of the marriage, half the county of Schwerin was pledged as security to Niels until her dowry could be paid.
He had a son Niels Nielsen Skarsholm af Halland (1215-1260) who married Cecilie Jensdatter Galen (1215-1260).
They had a son Jacob Nielsen Skarsholm af Halland (1250-1308).
Disputes over his claims to the German territories pledged to his father, led to the capture of his grandfather Valdemar II in 1223 by Henry, Count of Schwerin.