I've decided that it is perfectly socially acceptable to give condolences when you've learned of someone passing away. So, I should not be surprised or uncomfortable when someone does that. Really, that is the only hard part is figuring out what to say when someone says, "i'm so sorry for your loss."
I've decided that something possitive in response is nice. For example, "Thank you. I actually loved being Charlie's mother, and we were so happy to have the time that we had with him." I could make this shorter or longer or slightly different, depending on who I'm talking to, but I think that's the idea I'm gonna go with for now.