"Your uncle died."

I asked a child psychologist about this when I experienced it with my kids, and she said that it's important to use the word "dead" or "died" with young children.

Telling a child something like "he's gone to sleep and won't wake up" can make them fearful of failing asleep and not waking up (either for themselves, or another loved one).

Likewise, something like "he's in the sky now." Is meaningless and confusing. Will he be back? Can I go too? Why not? Etc.

Also, don't say something like "he went to the hospital, and won't be coming back." for the same reason.

Basically, try not to give them a new fear, on top of everything else. Just use clear, unambiguous language. Answer any questions they might have, and talk about him.

Don't make him a taboo subject, or something to be discussed in hushed tones. Ask them how they feel about it often over the next week/month. Feelings change and we all process things at our own pace.

Remember that talking about it isn't going to make them feel worse. It can only make them feel better. They need to know you are a safe place for their emotions - big, small, "good" or "bad" (no such thing as a bad emotion!)