I have adopted three children. The eldest was adopted around 3 years old, and has memories of her birth mom (birth dad was never in the picture), so it's not quite the same situation. We've always been open with our children about the fact that they are adopted, and they quite often brag to their friends that they have "two mommies and two daddies" instead of just one of each.
If your daughter has had no idea until now, I can see that broaching the subject might seem difficult, but I think some of the language we use with our children could be useful in your situation as well.
I would suggest talking to your daughter, and telling her something along these lines:
Here's something I haven't told you before: you actually have two dads! Your other dad had a lot of troubles, and it was hard for him to take care of himself, which meant that he couldn't do a good job of taking care of you, either. He always loved you and wanted the best for you, but he couldn't take care of you because of the problems he had. [Husband] loves you so much that he took over the job from your other dad.
It will probably take some time for her to process this, and then I am sure she will have questions, and potentially want to meet him. That's when you'll have to tell her that he is no longer alive.
I have some sad news. Your other dad died not that long ago. I'm sure he would have wanted to meet you someday, but sadly that can't happen. But there are [other members of his family] who want to meet you, and I bet they can tell you stories about him and what he was like. Do you want me to try to arrange a meeting with them?
Obviously the conversation doesn't need to go exactly like this, but this gives a general idea of how the conversation might go.
A few points to keep in mind:
- Keep comments about your ex neutral. You probably don't have a high opinion of him, but your daughter doesn't need to know that. Especially because he is no longer around, it's fine for her to have a rosier picture of what he was like.
- Keep things vague initially. She will probably have lots of questions, so answer them, but don't give her more information than she needs. "He wasn't able to take care of himself very well" is probably better than "He was addicted to [drug of choice]". If she presses for details, provide them at your discretion. It's also fine to say, "That's something we can talk about when you're older."
- She will have a romanticized notion of him, and will need to go through a period of mourning, despite never knowing him. Support her in this; it's a necessary process for her, and will help her process the knowledge and work through the grief.
- This could be hard on your husband. She may be confused about the "two dads" thing and wonder how he fits into the picture. Reassure her that he is fully her dad and loves her unconditionally, and that will never change.
- Above all, avoid language like "real dad", or that your husband is not her dad (he is!). If "other dad" is too vague, call him her birth dad, or biological dad. If you've already talked to her about sex at some level, you can explain that he was the one who conceived her. One line we use with our children is that they grew in birth mom's tummy, but they grew in our hearts. You want her to feel loved unconditionally by all of her parents; both you and your husband, and the birth father.