i explain these things as they come. my daughter is about a year older than your kids, and this time last year our own beloved golden retriever passed away right before our eyes. naturally, she was there with us. the dog died. we handled it in the same exact way that we would have had she not been there. she got to see us react, feel sad, handle the burying of the dog, etc. we discussed how we loved the dog, and that she will always be with us in our hearts. she was there when we buried the dog in our yard. she thought we could dig her up and pet her again, and i explained that we cannot, that once you bury an animal, or a person for that matter, the body decomposes in the ground (explained with that means), but that the dog's spirit lives on in our memory. she accepted what we said, and knowing the truth, the whole truth helped her connect with us in the experience, and gain confidence in learning how life works, how the world works.
everybody's explanation of death is going to be a little different, and that's the way it should be conveyed to a child. IMO, the only way to be is totally honest. ignoring the fact that it happened until it is "discovered" many months ago is a little "dishonest" or at the very least disingenous (sp?). giving a curt explanation that "he died" and nothing more leaves a young child with tons of unanswered questions, perhaps questions that he doesn't even know he has.
good luck with your situation.