This is a great book:
Lifetimes: The Beautiful Way to Explain Death to Children by Bryan Mellonie
It explains that all living things have a "life" with a beginning, a middle and an end. Birds, dogs, cats, people, plants, etc. You can tell him that normally, people get to the end of their life after a looooong, happy, healthy life. (So he doesn't worry too much!)
You can add anything you believe about Heaven, etc. You could explain that the body, after death, is a shell, the soul (or living part of the body) lives on, if that's what you believe. But that once a person is dead, they cannot come back to be with him, even though they love him. And you can tell him that memories are a great way of keeping people alive in our hearts after they're gone from earth.
Pull IN to the cemetery next time! Let him take a walk around & look at some of the old names, dates, markers, etc. Cemeteries are usually very historical places. He'll love it! You can also explain that burying a loved O. in a cemetery allows the family to go back, visit and remember the deceased.
I agree with the advice to avoid creepy stuff like "watching from Heaven", etc. My son was almost 3 when he lost his grandfather. They can understand a lot at that age, but no need to give him the heebie-jeebies! LOL