Though the sister transferred the property by a registered gift deed in favor of her own brother and she survived his death, the condition was that the property shall be acquired by the beneficiary after her death.
Here, the property was already transferred to the beneficiary (brother) at the time of execution of gift deed.
Section 19 of transfer of property act clearly defines this situation which is reproduced below for your information:
19. Vested interest.—Where, on a transfer of property, an interest therein is created in favour of a person without specifying the time when it is to take effect, or in terms specifying that it is to take effect forthwith or on the happening of an event which must happen, such interest is vested, unless a contrary intention appears from the terms of the transfer. A vested interest is not defeated by the death of the transferee before he obtains possession. Explanation.—An intention that an interest shall not be vested is not to be inferred merely from a provision whereby the enjoyment thereof is postponed, or whereby a prior interest in the same property is given or reserved to some other person, or whereby income arising from the property is directed to be accumulated until the time of enjoyment arrives, or from a provision that if a particular event shall happen the interest shall pass to another person.
Thus, the legal heirs of the deceased brother (beneficiary) namely his wife and children shall be entitled to an equal share in the property as successors in interest.