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As you said, her circumstances are very different this time around. I think you can just explain the reasons why she was not able to be a parent at the time when your son was born, and knew that joining your family was what was best for him, however, when the second baby was born things were different , and she felt she could provide for that baby. I would assure your child that she loved both of them equally, and did what she thought was best for each child.
I would refer to the younger sibling as "your brother/ sister", explaining that they will always have a special bond, even though they have different families.
Good luck, I know trying to figure out how to explain complicated issues to our children in a loving way, can be difficult.
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