Kids are quite resilient, my mum's sister died in her late 20's of cervical cancer and her parents and sisters decided not to take her young daughters (aged 6 and 8) to the funeral for fear it would be too upsetting for them.
20 Years later there is a resentment that they never got to grieve properly for their mum.
Also, neighbours / schoolfriends will talk and at some point the children will hear about what happened from a third party at a time you don't control. My view would be tell them the truth - finding out you have been lied to about something like this will merely heap more hurt on the kids when they need honesty