I'd explain to your son that we're from God & will return to God when our time on earth is up.. that his grandfather is now HOME with God & will peek over the clouds & watch over him for the rest of his life.. that he can still talk to his grandfather in prayers.. that death is not the end, but the beginning of new life.

Your 7 yr old son may not grasp the theological meaning of it, but he'll understand that his grandpa is now in a better place, and that he can still maintain a relationship with him through thoughts & prayers.

*hugs* & lots of prayers for your dad & your family.