Shootingstar, I am so sorry for your loss. I can't even imagine the pain.

As far as the children, I think they should be told. In many family situations, children figure out the truth, and the parents/adults are actually protecting themselves when they conceal things. In my life, I was harmed far more by ill-kept secrets than by facing difficult truths. Of course, there are familial and cultural differences which I can't know, and no one knows what is right for another family. But it's something to consider.

I hope your family finds peace and comfort in time.