Translation:My grandfather died yesterday.
I believe そふ is the formal word that you wouldn't use with your sibling(s), but perhaps a more proficient person can offer a more solid answer...
No - sofu is informal - only used for your own family. ojiisan is the formal word for Grandad. I have heard jiji commonly used for your own grandfather too - I've never heard friends use sofu. Also Japanese people frequently refer to elderly people (regardless of whether they know them) as obaasan and ojiisan.
Let's disregard addressing elders -- especially strangers -- because in those cases, you always use the respectful ojiisan and obaasan anyway. I meant the situation in which you refer to your grandfather as sofu is formal; when speaking to strangers, you'd refer to him humbly. When with siblings or in a group of mutual friends, you don't observe that level of formality -- which sounds like the same experience you've had yourself.
I think maybe you have a different understanding of formal. sofu (or more commonly jiji) is informal and used to refer to your own family - although you can still use the formal ojiisan/obaasan when talking directly to your own family members - much like we would in English, say when we are trying to butter someone up so we say "Mother dearest" instead of Mum/Mom. ojiisan and obaasan are formal and only used for other people's grandparents or if you were being super polite to your own grandparents.
Charlotte, I've just recently read over our wee conversation here and clicked to what you were saying - that そふ is humbler than おじいさん but more formal than じじ. Sorry about that. So obvious after a re-read!
I agree that you and I have different understandings of formal/ informal and respectful/humble. I enjoyed our discussion, but now we've reached an impasse. Thanks and have a great day.
Words like sofu (grandfather), sobo(grandmother), haha (mother), chichi (father), ane (older sister), and ani (older brother) are words that refer to your own family when talking to other people (though you can use them within your own family, but it sounds formal). They are humble expressions, versus saying "ojiisan" for grandfather, which uses the honorific "san". Using "san" to show respect to your own family when talking to others might sound boastful, which is why "sofu" is the more polite option.
I often hear my adult friends referring to their own parents as baaba and jiiji when talking to their children, but it definitely sounds a little childish for an adult to use those words in polite conversation. Also, it's really important to say ばあば so you're not calling your grandmother an old hag.
As far as I can gather, Japanese 死ぬ (しぬ) is considered just as blunt as English “to die”. If you wanted to use a softer word like “to pass away” in English, you could for example use 亡くなる (なくなる) and I’m sure there are even more indirect ways of saying it. So I think if the Japanese original uses a blunt way of saying it you should preserve the rough stylistic layer and use a blunt verb in English as well. After all you also wouldn’t do the reverse and translate English “he passed away” as the equivalent of “he kicked the bucket” ;)