Some Little-Known Risks of Using Safe Deposit Boxes

Many items wouldn’t be kept in safe deposit boxes if more people knew the facts, and that would be fine with the banks.

Safe deposit boxes are used routinely without much knowledge about the potential consequences to the users and their loved ones.

One issue is how safe items in the boxes really are.

Safe deposit boxes aren’t covered by federal banking law. The boxes are a side business of banks that regulators aren’t concerned about. State laws and regulations also generally say little about them.

Banks generally don’t guarantee the safety of box contents. Most safe deposit lease agreements expressly disclaim any liability by the bank or limit damages to the annual rental fee or a similar nominal amount.

In most states, no law holds a bank liable for losses you incur. Banks usually don’t carry insurance to cover losses to box renters.

Actions by the banks can cause losses to customers. When a bank closes or moves a branch, the bank might give customers notice to move the contents of their boxes.

After the deadline, the bank will drill open the boxes. The contents are put in cardboard boxes or envelopes that are put in storage or brought to the new location. Items can disappear during this process.

A box also will be drilled open after the bank loses contact with a customer. If the annual bill for the rental fee is returned or the fee isn’t paid on time, the bank might drill the box and put the contents in storage until someone claims it.

A few years ago, an article in The New York Times detailed several cases in which very valuable possessions disappeared from safe deposit boxes. The banks denied liability for the losses beyond the amounts specified in the lease agreements and aggressively challenged claims in the courts.

In some of the cases, the banks clearly were negligent and caused or contributed to the losses. But the courts ruled they had no obligation to compensate customers.

Before using a safe deposit box, ask the bank about its coverage and liability for damaged or stolen items stored in the safe deposit box.

Another issue is who has access to the box after a renter passes away.

Each state has its own rules, and banks often may supplement the laws with their own policies.

Some safe deposit rental agreements allow the renter to specify a person to be granted access upon the renter’s death. To use this policy effectively, you have to designate the person ahead of time, let him or her know about the plan, and explain where your key can be found. The person also might need a death certificate before the bank will grant access to the box.

If your safe deposit box has such a policy, know when someone with a duplicate key will be granted access to the box.

While sometimes a death certificate of the renter is required, some banks allow the designated person with a key access any time after he or she is named. That can be helpful at times but is a problem when the person can’t be trusted. The designee can visit the box at any time and remove items.

A classic problem occurs when a will is stored in a safe deposit box and no one is designated to have access.

At some banks and in some states, the estate executor can obtain access to a box after the renter passes away, but only by proving to the bank that he or she is the intended executor. The policy at many banks and in many states is to require the executor to have authorizing documents from the probate court.

But how can someone prove they’re the intended executor without the will, which is in the box? Sometimes a copy of the will is acceptable, but sometimes the original will is needed.

To resolve the problem, the executor or family might have to go to court to have someone authorized to access the box.

In other states and at some banks, someone other than the renter can gain access to a box after presenting certain paperwork from a court, such as an “affidavit in support of search.” A surviving spouse or other relative often must be the person accessing the box in these circumstances.

Often, the person must be accompanied by a court official or bank official and might not be allowed to take originals of any documents. An original will, for example, would be delivered to the court by the bank or court official.

Safe deposit boxes also are becoming less convenient. Many banks are closing branches or ending their deposit box services altogether. For many banks, the service is unprofitable.

For all these reasons, it often is better to keep your will and other important documents in a secure, fireproof box (or even a safe) at your home or office. Or store the documents with your attorney

Another option is to scan important documents into an electronic format and place the files in an online storage system. Lawyers and financial professionals often provide this service. Keep in mind, though, that many courts still require the original written will for probate, not a copy or an electronic version.

When you use a safe deposit box, select a bank branch that seems unlikely to be relocated or closed. Also, be sure the rent is paid and visit the box at least annually to check on the contents and ask about any changes at the bank.

Whether you store valuable items in a safe deposit box or somewhere else, insure them yourself. Many valuable items, especially those stored outside the home, aren’t covered by standard homeowners’ insurance. A separate rider or policy is required.

Of course, whatever you decide, share your actions with your estate planner, executor, and anyone else who is integral to the plan. The best plan isn’t sufficient if key people don’t know where essential items are located.