Praise be to Allaah.
Yes, what your wife has heard from one of her aunts is correct. Your wife has no right to her mothers share of her grandfathers estate, because your mother-in-law died before her father. She thus had no share in her fathers estate because one of the conditions of inheritance is that the heir should be alive after the death of the person from whom he or she is to inherit. This condition is not met in this case, therefore your wife has nothing except her share of her own mothers estate. The grandfathers estate should be divided among his own heirs, so his children, for example (your wifes maternal uncles and aunts), will be given their shares according to Islamic law, which is two shares for males and one share for females. If the grandfather left a wife behind when he died, she should be given one-eighth of the estate, and so on. And Allaah knows best.