you can add a fade effect by selecting the image, and clicking the 'transition' tab above the clip preview and selecting 'fade'. This is the simplest way to do so.
if this doesn't work for you, select the clip and go to: video effects- add effect- opacity, and animate the opacity to go down at the end of the image. Overlay the next image or video, and animate the opacity from 0 to 100 at the start.
hope this helps 
LM