What You Need to Know About Safe Deposit Boxes

What You Need to Know About Safe Deposit Boxes

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Storing emergency cash in a safe deposit box is also unwise, advisers say. Unlike money in a deposit account, cash in a safe deposit box isn’t insured by the F.D.I.C., and it may be vulnerable to theft. This year, the Federal Reserve Board took punitive action against a former bank employee who stole $30,000 in cash from a customer’s safe deposit box.

Banks aren’t immune to risks from natural disasters. So it’s best to seal documents or other items that may be damaged by flood in plastic bags or containers to help protect them from water damage, Mr. McGuinn said.

Paula Pierce, a lawyer in Austin, Tex., urged consumers to carefully read the contract for their safe deposit box, which outlines what happens if, for instance, you lose your key. The American Bankers Association said banks don’t keep copies of your key, so if you lose yours, the lock must be replaced. Often, Ms. Pierce said, “there’s a hefty charge for getting the box rekeyed,” so keep it in a safe place.

Also, be sure to keep current on rental fees, Ms. Pierce said. Details vary by state, she said, but generally, after a period of notice, the bank may be allowed to sell the contents of the box to pay delinquent fees. Any excess money is turned over to the state as unclaimed property.

David J. O’Brien, a fee-only financial planner in Midlothian, Va., said he encouraged clients to take an inventory and to visit the box periodically to verify its contents. He said a relative’s safe deposit box was mistakenly drilled open and emptied by her bank, which had confused it with another box with a similar number whose owner had fallen delinquent on rental fees. The box’s contents — including a watch with sentimental value — were eventually recovered, he said. But the incident suggests that letting items languish indefinitely is a mistake. “You need to catalog what’s in it,” he said, “and then check on it.”

Here are some questions and answers about safe deposit boxes:

How much does a safe deposit box typically cost?

Fees vary depending by location and the size of the box, and may range from $20 to about $200 a year. Customers with certain accounts may get a discount.

Are valuable items in my safe deposit box covered by insurance?

Not usually. The bank generally doesn’t insure the contents of the box. So if you are storing jewelry or other valuables you should buy insurance separately, said Lynne McChristian, a spokeswoman for the Insurance Information Institute. Typically, you would have the item appraised, then “schedule” coverage for its replacement value on your homeowner’s policy. Insurers often charge less to insure an item, she said, if it is kept in a safe deposit box.

Is the fee for my safe deposit box tax deductible?

Not any more, said Lewis Altfest, chief executive of Altfest Personal Wealth Management in New York. Such fees previously could be taken as a miscellaneous deduction, in some cases, on your federal tax return, but the deduction was suspended as part of last year’s tax overhaul.

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