Why You Shouldn’t Use a Safety Deposit Box

Protection? Security? Secrecy?  A giant two-foot thick swinging steel door in a bank basement, with armed guards and thumbprint entry?

Safety deposit boxes have long been considered a near-impenetrable location and the ‘best’ way to safeguard your baubles and important papers. 

For sure, there is also that added level of discretion that you can’t get with alternate storage methods.  

The thinking – not entirely off base – is that this ‘extra’ layer of on-site protection will ward off all risks of loss, theft or damage that you might be worried about if you kept these things at home. The added bonus is that the box can only be opened with your unique key. 

Great spy stuff, here.

But does ‘secret’ ‘protected’ ‘secure’ actually translate to optimal storage?  

Despite some benefits, that tiny deposit box key comes with some hefty drawbacks if you don’t educate yourself and those around you.  

Getting a Box: Not as Easy as You’d Think

Safety deposit boxes seem to have fallen out of favor in the last decade, so fewer new banks are including them in construction, and more old banks are removing them entirely.  

Assuming you can find a nearby bank that has them, you’ll need to:

• to appear in person (with 5 types of ID) 

• open an account at the bank. 

• sign a safe deposit agreement that covers everything from the rental fee to the liability limits (Yes, limits. More on that below). Understanding the tiny print can be difficult, and the terms are non-negotiable.

• You’ll be given a tiny key which is the only way for you to get the box open. 

The downside: the key is the only way for you to get the box open, and if you lose it you’ll have to pay a small fortune to have it drilled open and a new lock installed.

Cost of a Box: Fees Can Add Up Without You Realizing 

The cost of a box can be as little as $25 every 6 months or year, and because interest in boxes has waned considerably, some banks may initially offer box rental free of charge.

But keep in mind costs really vary, depending on what size you choose as well as its physical location in the bank vault: at eye level, or at a higher or lower spot.

And fees can blossom into larger charges over time if the bank changes hands (as banks are wont to do), and this may go undetected because the rental fee is usually automatically charged to the active account at the bank.  

In the event of non-payment — which happens often when someone dies — the bank may drill the box open and send the contents to the NJ Division of Unclaimed Funds.  There have even been reports of the banks accessing the wrong box, with noone being the wiser until they access the box at a much later date.

If you really want one, just make sure it’s worth your while: no need to pay $25 per year to safeguard a Deed if you can get the copy from the local Land Records office for $1.

Accessibility: If the bank lobby is closed, your box is closed!

The box is only accessible during bank hours, so be sure not to keep anything you (or someone acting on your behalf) might need in the event of an emergency, especially a health care or financial Power of Attorney document.

An extra word of caution: While you have a key, the bank also has a ‘safeguard key’ and can access the box if presented with a court order, if your account is delinquent, or the bank closes or merges with another bank. Again, read that fine print in your contract!

Financial Security:  Don’t Assume Your Stuff Has 100% protection 

Most people with safety deposit boxes keep jewelry, stock certificates, bearer bonds in them.

Shockingly, theft and loss are, surprisingly, things that happen every now and again. 

Most people know their bank accounts are protected up to $250K by the FDIC.

What they don’t know is that the federal regs do not provide any protection or insurance for safe deposit boxes or their contents.

And, even if the unthinkable theft or loss does occur, and you expect big bucks in recovery from the bank, think again: your recovery might be limited to the terms of the rental contract, which may limit the bank’s liability to just a multiplier(*) of the annual box rental.   

This could mean a $250 [$25 X 10(*)] recovery for jewelry worth $100,000 !

Rule of thumb there is to make sure you get the contents insured, or secure coverage through a company like Safe Deposit Box Insurance Coverage (SDBIC) in Chicago, underwritten by AXA Insurance Company.     https://safedepositboxinsurance.com

Death and the Safe Deposit Box: Not the ‘Best’ Place to Keep Your Documents

One of the most common reasons people get a safety deposit box is to safeguard their original Will or Trusts.  In truth, it can actually make for the worst possible storage choice for these kinds of documents. 

Here’s why:

• If you are a joint renter and share this box with anyone else, they have 100% access to it and the contents belonging to you, which means they could change or remove what is there (particularly if they don’t stand to benefit from the terms). 

• If you are the only renter, giving someone a key or its location won’t give them free and full access to get the documents needed in the event you die

• The bank may allow limited access to retrieve a document but it’s a Catch-22: the access is only given to someone who can prove they are named in the very document they are trying to access 

• In the best case scenario, you are named in and have a copy of the Will, the key, and box #.

• You would take that to the bank with the certified death certificate and your photo ID, and request access to the box to retrieve the original Will. Let’s hope it’s in there.

If the bank gives you a hard time, you’ll need to go to the Surrogate to secure a Petition and Court Order to Enter the Safety Deposit Box (there’s a $25 fee).  That should be enough to make the bank give you the Will which you’ll then take back to the Surrogate to get approved and appointed as Executor. 

One important takeaway: Once a box is opened, it can’t be re-closed and kept active in the Decedent’s name.  NJ law requires a bank to bring in an independent notary when it opens and empties a safe deposit box; they put the contents in a sealed package with an inventory signed by the notary, which then goes into the bank’s main vault. As you can imagine, once out of the box, there is a huge margin for error, loss and/or theft, so make sure the reason for opening the box at that early stage is a good one. 

If you do decide that incorporating a safety deposit box into your estate plan is the best choice for you, make sure you and others know the bank location and box number, have or know the location of any key(s), have an inventory of the box contents, and have copies of any documents stored in it.

What are the alternatives to bank safe deposit boxes for my valuable documents?

Consider a home safe or lock box with key or combination that you can purchase at Staples or Walmart.

Your estate planning attorney may provide some storage options:  The Pollock Firm offers storage in our secure vault so that your documents stay safe during your lifetime and accessible to family (named Executors and Agents in the documents) if needed on an emergency basis.