I’m so sorry for your loss 🕯️🌼
Lucy is a beautiful name. But don’t tell them until birth, go with your heart, when you feel ready to think about it.
Two middle names are absolutely fine also, and still frequent due to the general name choosing angst for all, you could do Lucy Cory Martha Surname. I don’t want to suggest more ideas as it should be your decision.
I come from a culture where grandparents names are usually expected to be the first grandchild’s first name, then the following ones’ middle name, although it has evolved a bit (depending on families really) now into people being free to keep it as a middle name, if the hurt is too much for the parents for instance, and that’s also the reason why it has always skipped a generation. It would be hoped in this instance that a great-grandchild would maybe have the name, but again the idea is middle name if people wish.
Otherwise you’re free (socially acceptable wise currently in my culture I mean) to give your child whichever first name you wish.
All this to say, please don’t feel the need to justify your own choices, it’s such a complex decision, how you would feel, how the older siblings, who I imagine are still young, would feel to have their younger sibling have their dad’s name.
( I’m sorry for the caricatural example but it’s a bit like Prince William and Harry’s girls, Charlotte was deliberately given a beautiful but neutral first name, that’s a bit the idea now in my culture also (which has huge societal pressure).