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Banking Education
The Key to
Your Safe Deposit Box
The Key to
Your Safe Deposit Box
If you think there isn't much
to using a safe deposit box beyond putting keys in locks,
you're in for a surprise. The safe deposit service may be
tucked down in the basement or far corner of your bank, but in
its own quiet way it is among the bank's most important
offerings-- and among the most misunderstood.
While millions of Americans rent a safe deposit box, few pay
attention to questions such as who could or should have access
to a safe deposit box (especially in an emergency) and how the
contents of the box are protected. About the only time people
ever consider these issues is when there's a problem, and then
it may be too late to prevent a loss.
To help you decide whether to use a safe deposit box, and how
to use one wisely, FDIC Consumer News has put together the
following questions and answers. Several of these questions
came from our readers, in response to an appeal from us. We
thank everyone who wrote in with questions or suggestions. (To
keep things simple, our references to "banks" are intended to
apply broadly to banks, savings institutions and credit
unions.)
In or Out?
Why should I rent a safe
deposit box?
It's a convenient place to store important items that would be
difficult or impossible to replace. The box also offers
privacy (only you know what's inside) and security. Although
many people like to keep valuables close by in a closet, safe
or file cabinet at home or in the office, these places
probably are not as resistant to fire, water or theft. Also,
some insurance companies charge lower insurance premiums on
valuables kept in a bank's box instead of at home.
What items should go into a
safe deposit box?
Any personal items that would cause you to say, "If I lose
this, I'm in deep trouble." Important papers to consider
putting into your box: originals of your insurance policies;
family records such as birth, marriage and death certificates;
original deeds, titles, mortgages, leases and other contracts;
stocks, bonds and certificates of deposit (CDs). Other
valuables worthy of a spot in your safe deposit box include
special jewels, medals, rare stamps and other collectibles,
negatives for irreplaceable photos, and videos or pictures of
your home's contents for insurance purposes (in case of theft
or damage).
OK, what should NOT go in a
box?
Anything you might need in an emergency, in case your bank is
closed for the night, the weekend or a holiday. Possible
examples: originals of a "power of attorney" (your written
authorization for another person to transact business on your
behalf), passports (in case of an emergency trip),
medical-care directives if you become ill and incapacitated,
and funeral or burial instructions you make. Consider giving
the originals to your attorney, and making copies to go in
your safe deposit box or to give a close friend or relative.
If I have a will, shouldn't
it go in my safe deposit box?
Whether your will should be at the bank or elsewhere, such as
with your attorney, depends on what your state law says about
who has access to your safe deposit box when you die. Ideally,
the person you name to oversee your financial matters after
you die (your "executor" or "personal representative") should
have early access to your original will (copies aren't valid).
David P. McGuinn, president of Houston-based Safe Deposit
Specialists, a consultant to banks and consumer groups, says
the recent trend in most states is to make it relatively easy
for co-renters, family members or the executor to remove the
will and certain other documents (such as life insurance
policies and burial instructions) from a deceased person's
safe deposit box. In those states, it's a good idea to leave
your will in the safe deposit box. "But in some states,"
McGuinn notes, "it may require a court order or another
official action to remove the will, which can take time and
money. That's why you should check with a bank official to
find out what is required under state law and your bank's own
policies in the event of your death."
Access by Others
Can I arrange for someone to
access my box in an emergency?
Yes. You can jointly rent your box with a spouse, child or
other person who would have unrestricted access to the box.
(Warning: In some states your co-renter may face delays in
accessing the box if you die. Also, merely giving someone else
a key won't be enough to grant access. He or she also must
sign the bank's rental contract as a joint-renter.) An
alternative is to appoint a "deputy" or "agent" (NOT a power
of attorney) who will have access to your box. A deputy/agent
and a general power of attorney are similar in that you may
grant or revoke the authority at any time, and the appointment
ends if you become incompetent or die. The main difference is
that a deputy or agent is appointed in the presence of the box
renters and a bank employee, which gives the bank greater
assurance about the validity of the authorization. "Many
people are surprised to find that a power of attorney does not
allow access to a box," says Donald Sansone, a Chicago banker
who specializes in safe deposit issues. "The bank has no way
of knowing if the power of attorney is still in effect or if
the renter was competent when the power of attorney was
signed."
Can law enforcement
authorities access my safe deposit box without my knowledge or
permission?
Mark Mellon, an attorney with the FDIC in Washington, says
that if a local, state or federal law enforcement agency
persuades the appropriate court that there's "reasonable
cause" to suspect you're hiding something illegal in your box
(guns, drugs, explosives, stolen cash or money obtained
illegally), "it can obtain a court order, force the box open
and seize the contents." But what about non-criminal matters,
such as a dispute with the Internal Revenue Service, a company
or other people over money they say you owe? McGuinn of Safe
Deposit Specialists says the IRS can "freeze" your assets
(effectively placing a hold on your bank accounts and safe
deposit box) until the dispute is resolved. Private parties
also can freeze your assets but doing so involves going before
a judge and proving that there's a legitimate dispute over a
debt.
Can a box be declared
"abandoned" and the contents turned over to the government?
Yes, but only if you don't pay your rental fee for a number of
years (as determined by state law) and after attempts to
notify and locate you prove unsuccessful. In that case, your
box will be reported as abandoned and the contents will be
turned over to the state's unclaimed property office. Often
this happens because the renter dies and the heirs have no
knowledge of the box or its contents. The good news is that
even if the state has sold your unclaimed property, you or
your heirs still have the right to claim its value. To contact
a state's unclaimed property office (sometimes part of the
treasurer's office), check the state government section in
your phone book. On the Internet, go to the home page of the
National Association of Unclaimed Property Administrators (www.intersurf.com/~naupa).
What happens to my box if my
bank fails?
When an insured bank or thrift closes, the FDIC usually
arranges for another institution to take it over, including
branches where you might have a safe deposit box. In those
situations, you should be able to conduct business as usual.
If the FDIC cannot find a buyer for your bank, it arranges for
you to remove the contents of your box so you can obtain a box
at another institution, if you wish. This is done within a few
days after the bank fails.
How Safe?
Are safe deposit boxes
protected from fire, flood or other disasters?
The companies that manufacture safe deposit boxes and the
vaults that house the boxes make them highly "resistant" to
fire, flood, heat, earthquakes, hurricanes, explosions or
other disastrous conditions. However, the key word here is
"resistant." There's no 100 percent guarantee against damage,
and substantial losses sometimes occur.
Are there extra precautions
I can take to minimize damage?
Yes. McGuinn offers this advice: Prevent water damage by
sealing items in airtight, zip-lock bags or Tupperware-style
containers. Also, put your name on each item, keep a list of
the box's contents, make copies of important documents and
even take photos of your most prized items left in the box.
That way, McGuinn says, if a disaster occurs your chances of
successfully identifying, claiming or recovering an item would
be increased.
Doesn't FDIC insurance cover
the contents of safe deposit boxes if they're damaged or
stolen?
No. By law, the FDIC only insures deposits in deposit accounts
at insured institutions. Although you may be putting
valuables, including cash and checks, into an area of the bank
that has the word deposit in its name, these are not deposits
under the insurance laws that the bank can use, for example,
to make loans to other customers. A safe deposit box is
strictly a storage space provided by the bank.
Does anyone insure my safe
deposit box against damage or theft?
Unless your bank is found to be negligent in the way it
handled or protected your safe deposit box, do not expect the
bank or its private insurance to reimburse you for any damage
or loss. If you're concerned about the safety or replacement
of the items in your box, first check whether your own
homeowner's or tenant's insurance policy covers your safe
deposit box against damage or theft. Many do cover box
contents up to a certain dollar amount, even including items
lost or damaged when they're out of the box. If your
home-related insurance isn't sufficient, talk to your
insurance agent about additional protection or find out if
your bank is among those selling limited insurance coverage on
safe deposit boxes. But before buying any extra coverage,
carefully review the policy and do some comparison-shopping.
Can thieves rob a safe
deposit box?
Yes, it happens, but fortunately not often. Safe deposit boxes
are stored in concrete or steel vaults equipped with
sophisticated alarms, locks, video cameras, motion sensors,
heat detectors and other security devices. Most U.S. banks
also have very strict access procedures, among them: verifying
signatures, restricting access to the vault, never leaving
anyone unattended inside the vault, and requiring two
different keys (one being the bank's "guard key") to open a
box. You can do your part to prevent a rip-off by following
our recommendations to consumers on the next page.
Final Thoughts
It's smart to want to protect irreplaceable documents and
valuable possessions, for yourself
and your heirs. We hope this report has given you answers and
ideas to make you even
smarter- and safer- when it comes to making decisions about a
safe deposit box.
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