Last night, I overheard my 5-year-old talking to my wife about our 1-year-old. She asked how we knew she was a girl, which my wife explained easily enough. My daughter then asked "What if she's a boy?" and my wife said that if she told us she was a boy, that would be ok and we'd believe her.
Then my daughter said, "Maybe she's transgender."
Kids today...
(I am not out to my kids yet, but my wife got a kid's book about Jazz Jennings a few weeks ago, which is why the 5-y-o is aware of the term. Apparently she was paying attention...)