Frazer Harrison/WireImage
February 07, 2011 08:50 AM

Nicole Kidman wept when she earned her third Oscar nomination last month, for Rabbit Hole – and then had to explain to her 2½-year-old daughter that they were tears of joy.

“Poor Sunday,” Kidman told PEOPLE at the Santa Barbara International Film Festival this weekend. “They said my name, and Keith [Urban] was like ‘Yeah!’ and jumping around the kitchen. And Sunday is like, ‘What’s happening? Why are you crying?’ Because I was crying.”

“She said, ‘Why are we sad?’ I said, ‘No. We’re not sad, Sunday. We’re happy.’ So, that would be my memory of this nomination – my daughter and my husband jumping around the kitchen.”

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Accepting the Cinema Vanguard Award at the Santa Barbara festival, Kidman, 43 – who won an Oscar for The Hours and was nominated for Moulin Rouge – told PEOPLE that she is thrilled to be finally be in a place of personal and professional fulfillment.

“I think I’m just at a place in my life where I’m in my 40s and [realize] I’ve been very fortunate,” she said. “I’m very grateful, because I’ve certainly lived through my fair share of pain and loss. So now, to be where I’m waking up in the morning going, ‘Thank you, God,’ is a very beautiful place to be.”

The 83rd annual Academy Awards will air live Sunday, Feb. 27, at 8 p.m. ET (5 p.m. PT) on ABC from Hollywood’s Kodak Theatre.

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