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As the Police have been involved, you should return the key to them to avoid any conflict.
If there is no Will, then as you may know, your sister's daughter is entitled to apply to be Administrator of the Estate (she would have to apply for Letters of Administration, which is th esame as Probate but the wording given where there was no Will) and on the basis that she is the only child, she would be entitled to the whole Estate, I'm afraid.
I hope this helps, but please let me know if I can be of any more assistance.
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