Well we did tell our children around 6 months ago, but our are a bit older. Our son is almost 12. He keeps reminding us in the mornings how many days he has left before his birthday. Our daughter is going to be 8 in April.
They were both starting to get really suspicious, but when it was finally time We just told them that I had always felt like a girl inside and was going to be changing to match. We did stress that it wasn't because I hated boys or that we expected our son to be the same, because it was an individual thing (based on my therapist's advice). We've always told them we would love them no matter and tried to teach them acceptance and evidentially it payed off.
At 5 I wonder if that is all you will have to do? You don't need to get all technical with them, just explain that it will be the same person only happier. I understand that Mommy is a hard earned title and didn't want to take it either, but eventually I suspect they will find something besides Daddy because it will much of a visual disconnect for them. I'm J-Mom and now our youngest corrects anyone if they say Dad.
Don't worry you are not going to scar your children for life

. There are TONS of things that are worse than this. My therapist met with ours (privately without Shannon or I) the other day and it was a short visit because they basically told her they didn't need to talk to her because there wasn't anything wrong. Our son has been great at picking out good people for friends. ALL of his friends have accepted what they were told without a blink and are still good friends. Actually all but one of his friend's parents are also friends to us, so they knew already and have been very supportive too.