For this very reason, I am opposed to signing a retainer on a percentage basis. If the deed to decedent's home is in the decedent's name, then it is considered a probate asset. If it passes by jtwrs, then it is not a probate asset. Either way, paying on a percentage costs more for you becuase the work to transfer the deed is minimal (and definitely much less than a percentage) and it is the same work that must be done either way. If you ever have to go through this again, I strongly suggest that you do not pay by percentage. The work is the same on a multi-million estate or a bankrupt estate. Evaluate the assets you have to deal with BEFORE signing the retainer.
The percentage would apply to whatever assets are part of the probate estate, as Ms. Seigel indicated. It is not clear from your summary whether that would include the home or not. My guess is that it would. If the property passed outside of probate, by way of a deed, then it would not be included in the estate and the lawyer's fees would only be calculated based on the personal property.
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It can be set by bank appraisal or fair market value. If you believe the house has a high value, you are better off signing an hourly retainer than percentage. My firm normally only does probate by the hour. In most cases, it is fairer to the client.