Hmm.. This is interesting. From Dying Without a Will :

"A. If the decedent was not married, the estate is distributed as follows:
1. To the decedent's children, who take in equal shares if they are in the same generation.
2. If there are no children or other issue (issue is the legal term for children, grandchildren, great-grandchildren, etc.) living, the estate goes to the decedent's parents."

So it appears that the estate would go to the children, but if there were no living children, it would go to the grandchildren before it goes to the grandmother's parents. The tricky question is that bit about whether the state only considers living descendants, in which case it may get split between the surviving children. But it's not clear to me.