My DF died before DD was born, my DM had remarried so DD always knew my Step-F as Granddad. She was about 4 when she asked me why Granddad was her Granddad but not my Dad. I explained simply that my DF had died & Granny had married Granddad, she puzzled over this for a few days but once she accepted it there were no further questions.
My DD's F died several years ago, I divorced him when DD was 5 he died when DD was in her late teens. I remarried when my DD was 11, oldest GS only knew my DH & he only ever knew Gramps, he was under 3 when my DH died so this question will probably not arise in our family.
I do think honesty is best but decision about what should be told & when is up to the Parents.