Some good ideas here. I recently lost my dear old Dad - he died the day before DS1's third birthday. DS2 was 18mths old. So I have a little bit of experience I'd like to share as your post is on just this issue.
Firstly, both sons had seen lots of dead wild animals - some of them is very advanced stages of decay so they know that dead means not alive - and not ever coming back. I think it is a good thing that kids know the cycle of life in an age appropriate way. Talking about the seasons is a great wat of talking about the subject of death (and lifeof course!)
Secondly, their Grandpa was ill for some time before he died - he died in hospital but had been there for six weeks, and DS's often visited up to a couple of weeks before. (This is relevant,bear with me!)
When the time came, I just told them Grandpa had died. I said that his soul, (which i told him was the special part of a person with all the love and smiles and kisses and laughs etc) had gone to Heaven (again, relevant). Both DS accepted that and asked some obvious questions, like what is it like, how he got there, who else is there and why his body did not go and suchlike - all of which were easily answered in an age appropriate way. Some people in real life have flamed me for the Heaven thing,...but I have to say that every one of those people perpetuate the Santa Claus myth on the basis that it is a good thing for kids.
Anyway, both went to the funeral - which was a life saver for me and they were not disturbed by it - they knew what it was all about and were not disturbed or upset by it at the time or since.
Both sons freely and happily mention Grandpa - and it has been a good nine months since they saw him. When DS1 talks it is usually in context and he is very comfortable with it. He is happy that his Grandpas "soul" is in a nice place and he is relaxed about the fact that his body got buried.
I never felt it necessary to have a specific conversation about death with DS - even though it was obviously going to happen to his Grandpa. I think it is great advice to have had simple, non-emotional chats about death in everyday contexts about animals and plants equally. I know it made it much easier for me to explain when it first happened to someone whom my Ds 's loved.
I mention the hospital thing because like the other posters we explained that usually people are old or ill or both when then die. Last week DS1 was in casualty after a fall we were sitting right opposite an elderly couple waiting for Mrs X to be seen. Audible conversation thus:
Mammy, that lady is old.
yes son, she is older than you and me.
Mammy, is she poorly?
No son, she has just hurt her leg and the doctor will be coming to sort it out soon.
Mammy, shall i tell her not everyone who comes to hospital dies?
yes son, I think she would be pleased to hear that!
(DS to Mrs X) Hello, you will be alright and the doctor will fix you and you can go home , ok?
!!! Compassionate at three,..result!!