All perfect praise be to Allaah, The Lord of the Worlds. I testify that there is none worthy of worship except Allaah, and that Muhammad is His Slave and Messenger.
Zina (fornication) is a grave major sin, and if it is committed with a Mahram (an unmarriageable relative), the unlawfulness and sin is even more emphatic. Please refer to Fatwa 88782. So, your son must sincerely repent to Allaah. The conditions of repentance are clarified in Fatwa 86527.
It is not obligatory to take the matter to the ruler to apply the Hadd (punishment prescribed in Islamic Law) on your son. He should conceal his sin and perform as many good deeds as possible in hope that Allaah accepts his repentance.
We advise that your daughter is treated kindly and cared for until she delivers the child. The child is to be traced back to the mother [only] and it is not permissible for anyone to adopt him, whether your brother or anyone else, because adoption is forbidden. Allaah says (what means): {And He has not made your claimed [i.e. adopted] sons your [true] sons. That is [merely] your saying by your mouths, but Allaah says the truth, and He guides to the [right] way.}[Quran 33:4] However, it is permissible to give the child to your brother to raise and care for it without him taking it as a child or heir. For more benefit, kindly refer to Fatwa 82371.
Also, it is not obligatory to inform the father (your husband) about the matter. If he found out about it, it would not be necessary to inform him that it was his son who did it if it would be subsequently harmful to inform him. In case the father pressures his daughter to tell him who did that with her, she may deny that she knows him, because even if lying is not permissible in principle, in case of a outweighing advantage, it is permissible to resort to it.
For more benefit on the ruling of lying, the situations when lying is permissible, and speaking indirectly instead of lying, please refer to Fataawa 88412 and 84728.
Finally, it should be mentioned that one should not resort to abortion which some people perhaps do in such a case. Abortion is forbidden, especially after the soul has been breathed into the fetus, as it is to kill a soul which Allaah has forbidden to kill without right. For more benefit, please refer to Fatwa 220906.
Allaah Knows best.