I heard that they won't understand until they reach *AT LEAST* 3 years old.
you can call 善寧會 (Society for the promotion of hospice care) -- 2868-1211, www.hospicecare.org.hk, in particular this page has some good materials for children and also people who need self-help materials on how to express their own emotions if their relatives die: http://www.hospicecare.org.hk/big5/tips3.html
(under 自助錦囊), they should have some materials about explaining death to children.
If you have a printer, I would suggest to print all the things out. They have some sharings from people whose' husbands / wives / children die and how they feel about it. It is extremely extremely touching and can comfort your heart!!!!
Unfortunately, the father passed away before the child born. So the child has never seen the father. He's almost 4-yrs-old now. So, want to prepare how to approach to explain to him according to his understanding.