Auntie finally hugged by lovely relative (5)
I believe the answer is:
niece
'relative' is the definition.
(niece is a kind of relative)
'auntie finally hugged by lovely' is the wordplay.
'finally' suggests the final letters.
'hugged by' means one lot of letters goes inside another (I've seen this in other clues).
'lovely' becomes 'nice' (I've seen this before).
The final letter of 'auntie' is 'e'.
'e' inserted within 'nice' is 'NIECE'.
(Other definitions for niece that I've seen before include "Female relation" , "Family relative" , "Female family member" , "Kinswoman" , "Criminal" .)