My bil has told his 3 year old son that Father Christmas doesn't exist, but is all a role play / fantasy that we re-enact!
My husband and I are keen for our 2 year old dd to believe in it unt she is old enough to question it.
Everyone is entitled to bring up children how they want and this year if nephew spills the beans it will be fine. But in future years we may have to avoid them over the Christmas period which would be sad.