November 2, 2016 • By Dennis Beaver
If you have a safe deposit box at a financial institution, can you answer these true/false questions?
1. If the contents are destroyed through fire or flood, or broken into, I will be compensated fully by either the institution, FDIC or my Homeowners Insurance.
2. It is against the law to keep cash in a safe deposit box.
3. The financial institution has a master key, so they can go into my box at any time without me being present.
4. What are the two most serious mistakes I can make with my safe deposit box?
Chicago-based CPA/Attorney Jerry Pluard hears these questions often. As President and Co-Founder of Safe Deposit Box Insurance Coverage, LLC (SDBIC) — the only company specializing in insuring contents of a safe deposit box — he has seen his share of unhappy faces of folks who have a safe deposit box, when he tells them:
“Contents of the box are not insured by the bank, credit union or FDIC in the event of theft, flood, fire, earthquake, or any other catastrophe under the terms of the box rental agreement. This no-liability policy is clearly stated in the rental agreement, yet many people do not take the time to read their contracts,” he points out.
“The FDIC insures customer deposits up to $250,000, but does not cover cash or any other valuables in a safe deposit box. Unless you purchase a separate rider requiring an appraisal and proof of ownership, Homeowners Insurance will offer some limited coverage — usually up to $1,000 — and typically will not insure cash or precious metals. Flood is generally excluded from coverage.”
In April, 2015 Chase bank informed customers they were “Not to store money, coin or currency unless it is of a collectible nature.” Suzanne Alexander, Chase spokesperson, stated, “We made the change because it is safer and more convenient to keep your money in a bank account, as it can accessed 24 hours a day at an ATM and is insured by the FDIC.”
We would just love to see how Chase plans on enforcing this prohibition unless their staff has X-ray vision.
Most lawyers advise keeping some cash in a safe deposit box for emergency purposes—or perhaps unused foreign currency from a trip. Pluard agrees, pointing out, “There is no federal or state law prohibiting cash in a safe deposit box. The bank’s rental agreement may frown on it, but they do not know what you are keeping in there.”
Can employees go into your box anytime they wish? Pluard answers, “No. Because the bank’s guard key is only able to open a box in conjunction with the renter’s key, employees cannot access the contents without your key.
In the years of our Great Recession, close to 500 banks failed across the country and were taken over by the FDIC. Their assets — including safe deposit boxes — were transferred to other institutions. “For people who had not visited their box for a long time — or kept the bank aware of how to contact them — this caused real nightmares,” he observes.
It is essential that a signer on the box visit the bank — and go into the box — at least twice a year. To not do so is a serious mistake for two reasons:
1. They need to have a current point of contact. If you move, let both “sides” of the bank know, as the box renter information system is almost always independent from the deposit accounting data base. You cannot be certain that a change of address for your deposit account will carry over to the box records, resulting in box customers simply “lost.”
After a period of time — which varies with each state — the contents will be sent to the state as “unclaimed property.” California keeps it forever — able to be recovered by owners or heirs — while some other states transfer the value into their general funds after only three years.
2. The best way to protect yourself is by visiting your box once every 6 months. With a smart phone, take a picture of the contents as this becomes proof what was there the last time you opened it. Did someone enter it? Was it emptied? Your cell phone, date-stamped photo will be good proof.
Finally, Pluard recommends, “Making sure there is a second person identified on the rental agreement and card who has signature authority so they can get in event of your death or incapacity.”
Anyone who has a safe deposit box with contents of a considerable value can learn a great deal from the SDBIC website. It is at www.safedepositboxinsurance.com.
Dennis Beaver practices law in Bakersfield and enjoys hearing from his readers. Contact Dennis Beaver.