My grandpa lived with me when he was alive. Then one night when I was little I had a dream that my grandpa died and he was in his bed, surrounded by lots of angels. Then that morning I woke up and my grandpa was dead.
Once after my grandpa died I had a dream that my rabbit was going to die. I was awake and I just knew my rabbit was going to die for some reason. I told my mom and she said my rabbit was fine and he wasn't going to die. The next day my rabbit died.
When we sleep the bonds of our spirit with our body relax and we can have 3 types of dreams, first is the physiological one, classical is the sheet curls up in our neck and we dream that we are being hanged... Means something from our environment influences our dream. Second is psychological, you have a mathematics final exam and you have studied for hours and you are very worried with, so you dream with the math exam, or the bill you have to pay and so one... The third and most important one is the spiritual dream that is actual a meeting with spirits good ones and bad ones (nightmares).
When your grandpa died, you really saw all spirits that helped him left his body, just that.
This is very common!
You can get more details on The Spirits' Book both by Allan Kardec
Http://www.ssbaltimore.org/PDF/Spirits.pdf
Good study!