This is unfortunately something I have recent experience with. My mother passed away in September, and she and my 3 year old son were VERY close. It was rather sudden, and he has had a lot of questions. The way I explained it was similar to the way I explained when their dog had to be put to sleep last year. I told him that the doctors really tried to make her feel better, but sometimes they just couldn't, and so she went to live in heaven so she could feel good again. I told him the only problem was that she couldn't come back from there, but that she COULD watch over us and see him, and that she was really happy to see him. I am not an extremely religious person, but I think it really helps small children if they have a "place" to put the person in their minds.
I did take him to the cemetery. I never mentioned that there were bodies there or that her body was there. I told him that was where people went right before they went to heaven -kind of like us going to the airport before a trip. I thought telling him about her body might further confuse him and freak him out, so we call her gravesite her special place, and I told him we could go there whenever he wanted and we can take flowers because that makes her happy. We took some pumpkins on Halloween, and I also told him he could speak to her -that she wouldn't speak back, but that she would hear him.
Now, I understand if your beliefs are different. I do believe in an afterlife, but my beliefs are far more ambiguous than what I told my son. However, at the age of 3, death is such a huge concept that I found simple explanations that also made him feel better really helped. They have plenty of time to find out more truths regarding death and form their own opinions as they grow up. Sometimes he still asks why she won't come back or remarks that she went to heaven, and he says he misses her. I told him that's why I cried and his grandfather cried sometimes -because we miss her. You can tell your daughter not to talk too much about your aunt over Christmas because it may make other family sad, but if she has a concrete explanation in place, she probably won't say too much except maybe that Aunt is in heaven.