Explaining dementia to children can be quite difficult. Telling an 8 year old that their family member may forget them or treat them differently at any second of any day can be hard; especially when they are very close.
Use something that is familiar to them such as an analogy hoping that they will understand. Say your kid loves Peppa Pig; sit them down and explain that one day grandpa pig could start forgetting things, even Peppa’s name. (At this point your child might make a connection) Grandpa pig might even forget how he got to the top of the hill and in mommy and daddy pig’s house. He may not remember even mommy pig or daddy pig.
If the child does not understand or pick up what you are saying then just try the next option, explain to them directly. Don't underestimate your child; children can comprehend more than we think. For example, say “Your (family member) has a bit of a problem. They are finding it very hard to remember easy things, even our names.” Then reassure the child that their grandparent still loves them and the disease may affect them physically but not the love they have for them, that will never change. This will comfort your child and also help them understand their grandparent's current behavior and how the disease may affect their future interactions.
Neither of these options is but it is best to discuss with them sooner than later.
Here are some additional resources.