Safe Deposit Boxes – How safe are they?

 A safe deposit box is a metal box, usually housed in a private area in a bank. There are two locks on each box. When you rent a safe deposit box, you receive one or two keys to one of the locks The bank keeps the key to the second. The keys to both locks are required for the box to be opened. Safe deposit boxes are available in a variety of sizes. The rental is payable annually, and is usually around $40 – $70. Larger boxes, of course, have higher rent.

A safe deposit box is a convenient place to store important items that would be difficult or impossible to replace. The safe deposit box, also, offers privacy and security. Although many people keep valuables close by in a closet, safe or file cabinet at home or in the office (or under the mattress), these places are not as resistant to fire, water or theft as a safe deposit box. In addition, some insurance companies charge lower insurance premiums on valuables kept in a bank’s safe deposit box instead of at home.

Who Has Access?

Who could or should have access to a safe deposit box – especially in an emergency? You can jointly rent your safe deposit box with a spouse, child or other person. Any joint owner can have unrestricted access to the box. (Merely giving someone else a key will not 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” who will have access to your safe deposit box. A deputy/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 banks will not permit access to someone who has only a power of attorney. It is always best to have the person you wish to have access sign the card at the bank as a deputy/agent.

In general, consider putting anything that would be difficult or impossible to replace in your safe deposit box. Here are some examples:

Your Will

Power of Attorney (but please keep at least one original in a safe place outside of the box. An agent can’t use a power of attorney if it is locked in a box to which he has no access.)

Originals of your insurance policies

Birth, marriage and death certificates

Military records

Citizenship Papers

Court Decrees

Social Security Card

Deeds, vehicle titles, mortgages, leases and other contracts

Stock certificates, bonds and certificates of deposit (CDs)

Jewelry, medals, stamps, coins, collections

Negatives for irreplaceable photos

Videos or pictures of your home’s contents for insurance purposes (in case of theft or damage).

Copy of your passport (don’t put anything in the box that you may need to get while the bank is closed)

If you itemize deductions, you may be able to get some tax benefit from the rent for your box. The rent is deductible as a miscellaneous itemized deduction. However, miscellaneous itemized deductions have to exceed 2% of adjusted gross income before they have a tax benefit.

If the authorities convince the appropriate court that there is “reasonable cause” to suspect you’re hiding something illegal in your safe deposit box (for example, guns, drugs, explosives, stolen cash), they can obtain a court order, force the box open and seize the contents.

What about the IRS? The IRS, following proper procedures, can “freeze” your assets by placing a hold on your bank accounts and safe deposit box until the tax dispute is settled. Any person who brings a civil suit against you can also get a court order to freeze your assets if the petitioner/plaintiff can prove to the judge that there is a legitimate dispute over a debt and a risk of moving or hiding the money or box contents.

Escheat is the process whereby states and federal agencies acquire custody of unclaimed property and abandoned assets. Under Pennsylvania law, property that is “dormant” for a period of time, usually five years, must be reported to the Commonwealth as unclaimed property and given to the Commonwealth for safekeeping. (Most of us don’t consider no activity in five years as abandoned – but there you have it.) The escheat law applies to all kinds of property including abandoned bank accounts, forgotten stocks, checks that have not been cashed, certificates of deposit, life insurance policies, safe deposit boxes, etc.

How does a safe deposit box escheat? If you don’t pay your rental fee and attempts to notify and locate you prove unsuccessful, your safe deposit box will be reported as abandoned, and the contents will be turned over to the Commonwealth’s unclaimed property office. Often this happens because the renter dies and the heirs have no knowledge of the box or its contents. (It’s always a good idea to have the decedent’s mail forwarded to the executor.) For more information about Pennsylvania’s unclaimed property law see www.patreasury.org/aboutUP.htm. If you think you may have abandoned a safe deposit box in the past, or you are the heir of someone who may have done so, there are free databases with information from most states. Check out Unclaimed.org and MissingMoney.com.

Make sure this doesn’t happen to you. Call your bank to confirm that your rent has been paid and they have your correct address. It’s a good idea to have the fee automatically deducted from an account. It’s a good idea to visit your box at least once a year. Make sure your family or other beneficiaries know where you have a box.