Thank you for your question. I am a Pennsylvania licensed professional and will do my best to assist you with your concerns.
Under Pennsylvania intestate laws, if there is no will in place, the descendent of the deceased is the first to inherit if there is no spouse. The ex-sister-in-law is correct that their mutual son is entitled to the full estate. That is correct, and if your brother passed away, now it is too late to create a trust to place his assets into, that had to have been done before he passed or if he would have left a will denoting someone else as the inheritor. I can understand that this is an emotional time for everyone, but at least in this instance she would be correct--here is the actual statute that governs:
§ 2103. Shares of others than surviving spouse.
The share of the estate, if any, to which the surviving spouse is not entitled, and the entire estate if there is no surviving spouse, shall pass in the following order:
(1) Issue.--To the issue of the decedent.
(2) Parents.--If no issue survives the decedent, then to the parents or parent of the decedent.
(3) Brothers, sisters, or their issue.--If no parent survives the decedent, then to the issue of each of the decedent's parents.
(4) Grandparents.--If no issue of either of the decedent's parents but at least one grandparent survives the decedent, then half to the paternal grandparents or grandparent, or if both are dead, to the children of each of them and the children of the deceased children of each of them, and half to the maternal grandparents or grandparent, or if both are dead to the children of each of them and the children of the deceased children of each of them. If both of the paternal grandparents or both of the maternal grandparents are dead leaving no child or grandchild to survive the decedent, the half which would have passed to them or to their children and grandchildren shall be added to the half passing to the grandparents or grandparent or to their children and grandchildren on the other side.
(5) Uncles, aunts and their children, and grandchildren.--If no grandparent survives the decedent, then to the uncles and aunts and the children and grandchildren of deceased uncles and aunts of the decedent as provided in section 2104(1) (relating to taking in different degrees).
(6) Commonwealth.--In default of all persons hereinbefore described, then to the Commonwealth of Pennsylvania. (Apr. 18, 1978, P.L.42, No.23, eff. 60 days)
1978 Amendment. Section 9 of Act 23 provided that Act 23 shall apply only to decedents dying after the effective date of Act 23.
Cross References. Section 2103 is referred to in section 2104 of this title.