SD is 4.5 and was so excited about baby Isaiah. We tried our best to help her understand that once Isaiah was born, he wouldn't come home with us right away because the doctor had to fix his heart. The other day she asked me if Isaiah was in Heaven with her grandfather. I told her that he was, but not to worry because there were plenty of people there to take care of him and play with him. I said, "He's not sick anymore." Then she asked if we could take him home since he wasn't sick anymore.
When I said no, she started to cry. I told her that it was okay to be sad & it was okay to miss Isaiah. The next morning she didn't want to eat her breakfast because she was "sad Isaiah's not coming back from Heaven".
I don't know how her mom handles this when SD asks at home, which makes it that much harder.
Re: Helping other children understand loss
I don't have a living child, but my loss group handed out this book to parents who did.
https://www.amazon.com/Were-Gonna-Have-Angel-Instead/dp/0972424113
Not sure how helpful it will be for your situation, but wanted to make you aware it existed!
A friend of mine gave me this book for my daughter who wasn't quite 4 when we lost Annabelle. She loved it and it is well written. We actually had to put it away because she wanted to read it every night and when we had bad days, it was hard to get through it.
BFP #1 12.24.07 - DD born @ 39w1d on 08.26.08

BFP #2 08.04.11 - DD born still @ 37w3d on 03.25.12
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TTC #3 since May 2012
BFP #3 12.29.12 - CP @ 4w2d on 01.02.13
BFP #4 10.17.13 - CP @ 4w2d on 10.23.13
BFP #5 04.06.14 - MMC 05.07.14
No longer trying to conceive.
I'm on an iPad... Sorry the link didn't work. It's called We Were Gonna Have a Baby, But We Had an Angel Instead