As with all family terms, you only capitalise the words that are used as names in your sentence. So if you say 'This belonged to my grandpa', you don't capitalise it. In this sentence, 'grandpa' is no different from 'cousin', 'brother' or 'friend. It's just a word. However, if you say 'Say hello to Grandpa for me', you are using 'Grandpa' as a name, and - like all names - you capitalise it. It's quite logical, really!