I have 2 girls currently both 5 years old(until my oldest turns 6 next month)their dad has been in prison since they were about 1 year and 1 month old, for sexual molesting the older one, I went to court and had his parental rights terminated,so far it has been ok, but now that they are in school, they are starting to realize kids have Daddys, my question is what should I do if they ever ask why they don't have a Daddy?

There's a wonderful book titled "Do I Have a Daddy?" that might help. Granted, it doesn't deal with the exact situation you're in, but the message is a good one for kids.