Can I be charged for withdrawing funds from a 401k?

Beneficiaries of 401K plans have two choices. If your son has not already elected to roll the money over into an inherited IRA, he should be able to take the money out of the plan in the first 5 years following your sister's death and pay not early withdrawal penalty. He will, however, then be required to take out all fund and pay all differed income taxes. If you son is still a minor and was named directly as a beneficiary (as opposed to the beneficiary being a custodial account or trust of which he is the beneficiary) there may be a problem with his receiving the money without a court ordered guardianship, court created trust, or blocked account. You should check with the company about what they will require and work with an attorney to have that set up so that it can receive the funds.

First of all, do NOT request the funds until you meet with a Certified Public Accountant or tax attorney. An improper request could cost you dearly. There are ways to access the funds. Apart from rollovers to an IRA, all money distributed from a 401k is taxable except amounts that represent the return of nondeductible contributions, determined under IRS rules. If you don't need the money right away, it may possibly make sense to keep the account open as long as possible. As long as the money stays invested in the 401k, your funds can continue to grow tax-deferred. Further, you may have the option of actively investing the account. If you trade within the 401k, there is generally no income tax liability on appreciated securities that you sell and no tax reporting that you need to worry about. However, the tax rules make it unwise for you to simply ignore your account until you really need the money. If you delay taking distributions from your account beyond certain deadlines, you face substantial tax penalties. So you have to know when to withdraw money. These rules could cost you enormous amounts when you guess wrong. So see your CPA or your tax lawyer and do not request any money until you do.