My husband and I married last year and he would now like to adopt my daughter who is 2 who I had from a previous relationship which ended badly. My daughter's biological father was not named on the birth certificate but does see her once a month when she visits his parents overnight which is an arrangement I set up so they could see their granddaughter. It is only from the word of the grandparents that I believe her biological father does visit her while she is visiting them.

My husband has been like a father to my daughter since she was about 6 months old and she is very close to him and calls him daddy. Legally how would he go about adopting my daughter?

Adoption is a legal process and has to be affirmed by a court. You need an attorney to prepare the paperwork. So shop around for one and let them handle everything.

The father is going to have to relinquish his rights. Even if he's not on the because the court will require that he be contacted and sign off. This may be a problem because, the grandparents want to retain a relationship with the child. So you may have to sign an agreement with the grandparents that they will continue to have visitation rights. Again, your attorney will advise on all this.

What sort of legal custody agreement do you have with the bio father, is he paying child support, if not why not.

But the bio father will have to be contacted and sign his rights away to allow the adoption. You need , or at least should have an attorney to handle this.

The biological father has no custody rights over my daughter and we were never married... and he has paid no child support towards her since she was born 2 and a half yrs ago. Basically he only pops up to see her when she is visiting his parents once a month but I have made it quite clear to them that they must remain with my daughter at all times and he is not allowed to take her out of their house without them being present.
I am planning to make a will so that if anything happens to me my new husband is awarded custody of my daughter as she hardly knows her biological father and he has never cared for her or provided for her.

The biological father has no custody rights over my daughter and we were never married....and he has paid no child support towards her since she was born 2 and a half yrs ago. Basically he only pops up to see her when she is visiting his parents once a month but i have made it quite clear to them that they must remain with my daughter at all times and he is not allowed to take her out of their house without them bein present.
I am planning to make a will so that in the event that anything happens to me my new husband is awarded custody of my daughter as she hardly knows her biological father and he has never cared for her or provided for her.

You cannot will custody away. You can assign guardianship, but if the biological father wants to challenge it, its absolutely his right and he will win.

I think that would be very nice for your husband adopt your daughter. When I meet my husband he adopted my son. You have to trust him and love him. If he is a daddy to the baby let him be daddy. This will let him know that you really love and trust him and this will make your family life better good luck.