I find it amazing the way kids accept what parents tell them,,and if a parent presents something new as a part of life, that is how children accept it.
This is a horrible time for you and your family,,my condolences. Loosing someone leaves such a hole in life for a while, then they are always missed, but the wound heals.
I would suggest explaining it as simply and truthfully as you can. Grandpa was very old, and his body wasn't working the way it needed to. This happens when people get old. There comes a time when their body stops working at all, and they die. Then the body that we knew as Grandpa is just like an old seashell, it is still there, but empty. The real Grandpa, the part inside, goes to a different place, and really wonderful place. ( as symbiosis said, I don't know your spiritual beliefs..) We will never get to play with grandpa again, he won't be coming over for dinner anymore, he is someplace where we can feel him, but we can't see him or spend time with him. But there is a tiny bit of him left inside our hearts, and we will always love him.
I really discourage you from using some of the phrases that have been used over the years that are not quite true, but the intention was good. Grandpa is not sleeping forever..so on
Hang in there...you will get through this!