I figured out after awhile to just stick with "between my husband and I we have 5" and following that up with a who's who that rivals the famous publication listing who was born to who, how old, where they lived, etc. It wasn't a short answer, but it got a chuckle usually.
And then Michaela died and I had to start all over figuring out the right answer. It seems easy enough, but it wasn't. At first I made the same mistake a friend of mine was telling me about yesterday. I would say we had 4 and one in heaven. Talk about a show stopper. Looks of pity, followed by uncomfortable condolences, followed by uncomfortable silence, followed by the person looking frantically for an escape.
So I offer up this suggestion for the bereaved parent. Give the questioner a break. They aren't asking how many children you have alive. Why even mention it in the first breath? Your child is your child, forever, period. Include your angel child in your number, you will feel disloyal if you don't. But there is no need to announce that he or she is dead, unless perhaps you only had one. That makes it a little more difficult, but at least try to offer up more that just that piece of information.
For those with surviving children, it is a little easier, I think. I have a memorized answer that seems to put people at ease. I still say between my husband and I we have 5. I usually leave it at that until the follow up question (how old, where are they, etc). Then I start with the oldest and work down adding a tidbit about each one. Misti is the oldest she lives in CT with her husband and three children, my oldest daughter, Michaela, was killed in a car accident at 21, my stepson Brandon is 22 and at FSU, my son, David is 21 and going to a small school in Iowa, and the youngest, Heather is 20 and expecting our 4th grandchild. Then I repeat the question back to them if appropriate. Sure it seems rehearsed. It is.
There is still that shock of the death of a child, but there is a lot of other things to process, so by the time I am done, they can simply acknowledge the death and either tell me about their own children or comment on one of the other bits I have given them to work with.
And for the person confronted with someone telling you that their child died. Unless they burst into tears or act like they need consoled in some way. A simple acknowledgement and perhaps a follow up question. "I'm sorry to hear that, how did she die?" Followed by a second condolence and then simply move on. Ask about one of the other children if there are any or ask a question about the personality of the lost child that is age appropriate. And then move to another topic of conversation. It is ok to talk about your own children. It is ok to ask more questions if you want to. It is not ok to say "I know just how you feel, my dog died last month" or "I understand, I lost my father last year"....unless you also lost a child your loss is irrelevant to this particular conversation. It isn't unimportant, it just isn't an appropriate response.
That is all. :). I doesn't seem that complicated any more.