Corrected entry: When rescuing the children on Olaf's boat, Mr. Poe finally tells Count Olaf that he would not inherit the Baudelaire's fortune if anything were to happen to them, as only "blood relatives and married couples" would, initiating Olaf's plot to marry Violet. But at the beginning of the movie, while Poe is bringing the children to Count Olaf for the first time, he tells them that Olaf is their closest relative ("either your third cousin four times removed or your fourth cousin three times removed").
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Correction: By "closest" living relative, Mr Poe means that Count Olaf is their closest relative geographically (Klaus points this out - "I don't think that's what 'closest' is supposed to mean" - and the book confirms this). The Baudelaires could have another relative who is closer to them on their family tree, meaning that they would be the ones in line to inherit the fortune instead of Olaf.