The teenage daughter of gangland killer and drug lord Carl Williams will receive compensation from the Victorian government over his 2010 jailhouse murder.
But his father George and estranged wife Roberta have been forced to relinquish their suit against the government, which claimed Wiliams' murder in the maximum-security Acacia unit at the Barwon Prison was preventable.
Announcing the payout on Tuesday evening, Attorney-General Martin Pakula said the government will not pay any compensation to George or Roberta Williams, who have withdrawn their claims, but it has reached a confidential settlement with Dhakota Williams denying any liability in the matter.
The funds will be held for Dhakota in a trust until she turns 18.
Shadow attorney-general John Pesutto said the government must ensure adult members of the Williams family cannot benefit.
"The public is owed a full and honest explanation from (Premier) Daniel Andrews on why he has agreed to pay this compensation," he said.
Carl Williams was a leading figure in Melbourne's bloody underworld war, in which more than 30 people died between 1998 and Williams' own death at 39 in April 2010.
Williams was jailed for life with a minimum of 38 years for the murders of gangland rivals Lewis Moran and his son Jason, Mark Mallia and Michael Marshall.
He became a marked man when word spread he was assisting police with information on crimes including the murder of police informer Terence Hodson and his wife Christine in 2004.
Williams was bashed to death by Matthew Johnson using part of an exercise bike inside their shared cell.
Despite CCTV surveillance of the cell, it took 27 minutes before anyone realised he lay fatally injured.
The Williams clan wanted to know why Carl was not protected and how Johnson had a copy of his statement implicating former drug squad detective Paul Dale in the Hodson killings two days before the murder.
A police task force later cleared Dale of the Hodson murders.
A Victorian Ombudsman's inquiry found the prison system failed in its duty to protect Carl Williams.
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