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All Contents © 2020The Kiplinger Washington Editors
By Bob Niedt, Online Editor
| September 18, 2018
In today’s digital age, in which seemingly anything that matters is stored virtually “in the cloud,” a physical safe deposit box comes across as a relic of the bricks-and-mortar past. But don’t be too hasty to dismiss the importance of keeping certain valuables securely tucked away in your bank’s vault. A safe deposit box can offer critical protection for important documents and prized possessions.
“I have birth certificates and Social Security cards and old valuable baseball cards that were my father’s in a safe deposit box,” says William P. Simons IV, president and CEO of Rust Insurance Agency in Washington, D.C.
A safe deposit box isn’t a wise choice for everything, however. We talked to experts to come up with a list of nine things you might come to regret locking away in your bank, which isn’t open nights, holidays or perhaps even weekends. Instead, Simons recommends storing important items that you need to access more frequently or on short notice in a fireproof home safe that’s bolted to the floor. See the list of safe deposit box no-no’s.
Keeping a stash of cash in a safe deposit box isn’t a good idea for several reasons, warn experts. First, if you need the money in an emergency, but the bank is closed, you’re out of luck. Second, the idle cash loses buying power over time due to the effects of inflation. It’s better to put the money in an interest-bearing account or certificate of deposit. Third, some banks expressly forbid storing cash in a safe deposit box. Read the fine print of your agreement.
Keep in mind, too, that cash in a safe deposit box isn’t protected by the Federal Deposit Insurance Corporation, says Luke W. Reynolds, chief of the FDIC’s Community Outreach Section. To receive FDIC insurance, which covers up to $250,000 per depositor per insured bank, your cash needs to be deposited in a qualifying deposit account such as a checking account, savings account or CD.
Let’s face it: Unless you’re, say, an international jet-setter or global business executive, you probably don’t need your passport in hand 24/7. So it’s tempting to store it in a safe deposit box where it won’t get lost, damaged or stolen. Our advice: Avoid the temptation.
A planned trip is one thing, but emergency trips by their nature are unplanned – and inevitably arise during non-banking hours. A child getting sick while studying abroad or a parent suffering an accident while on an international cruise can spark a scramble to book tickets to leave the country on short notice.
“When we talk about important documents [to store in a safe deposit box], a passport would be a bad idea for that last-minute trip to Europe that you booked at 5 p.m. and your flight is at 9 p.m.,” says Rust Insurance Agency’s Simons, who keeps his passport in his home safe. “If your passport is in the safe deposit box, you’re staying home.”
It’s fine to keep copies of your own will, your spouse’s will and any wills in which you’re named the executor in a safe deposit box. However, do not store the original copy of your will there – especially if you’re the sole owner of the safe deposit box. Here’s why: After your death the bank will seal the safe deposit box until an executor can prove he or she has the legal right to access it. This could lead to long and potentially costly delays before your will is executed and your heirs receive their inheritances.
Instead, keep the original copy of your will with your attorney or somewhere else where your executor can access it without jumping through legal hoops.
Leaving a letter of instruction to go along with your will is a smart estate-planning move. The letter can outline such things as whether you want to be buried or cremated, and what kind of memorial service, if any, you’d like to have. The level of detail is up to you. Also, a letter of instruction can include details on specific bequests – Uncle Earl gets your “Star Wars” DVD collection, Cousin Vicky gets the pearl earrings, and so on. But if your letter of instruction is sealed inside a safe deposit box that no one can access, then your final wishes might not be granted.
Keep the letter of instruction with your original will. Simons also recommends sending dated copies of the letter to anyone who is designated to receive a specific bequest.
You’ve taken the right steps and completed the legal documents that would grant so-called durable power of attorney to a trusted friend, family member or professional adviser. That way, should you become incapacitated or somehow unable to handle your legal and financial affairs, that person has the authority to step in and make decisions on your behalf.
However, if that POA is locked away in a safe deposit box that no one can access, then the person you are counting on to protect you at your time of need could find his or her hands tied. Keep the original POA with the original copy of your will, and provide copies of the POA to those who may one day need it.
When it comes to estate planning and your health, two documents are indispensable: a living will and a health care proxy. These documents are sometimes referred to collectively as advance directives, but each serves a unique purpose. A living will states your wishes for end-of-life care: Do you want a ventilator or feeding tube used to keep you alive? Do you want to be resuscitated if your heart stops? Absent a living will, doctors are obligated to take extraordinary (and perhaps unwanted) steps to save you. A health care proxy, also known as a health care power of attorney, designates someone to make medical decisions for you in the event you can’t make them for yourself.
Neither document will do you much good locked away in an inaccessible safe deposit box. Make sure your medical providers, family members and health care POA have copies on hand.
Heirloom jewelry, a wedding band from your first marriage, rare coins and similar valuables are good candidates for a safe deposit box – but only if they’re properly insured. The FDIC doesn’t insure the contents of a safe deposit box, nor does the bank itself unless otherwise stated in your agreement. Wells Fargo, for example, explicitly states that box contents aren’t insured and advises box owners to “purchase an appropriate policy from the insurance company of your choice.”
Standard homeowners insurance offers some coverage for personal property kept off-premises, but limits are typically low for valuables such as jewelry and collectibles. One option is to contact your insurer to see if the limits can be raised. Alternatively, consider what’s called a personal articles floater, a supplemental policy that provides added coverage for specified valuables, says David H. Borg of the Borg & Borg insurance agency in Huntington, N.Y. You’ll likely need to get the items “scheduled,” which means providing original receipts and/or written appraisals. It’s a good idea to keep appraisals up to date for items that fluctuate widely in value. Be sure to take photos, too, in case you ever need to file a claim.
A spare key is one of the worst things to keep in your wallet. If your wallet is ever lost or stolen, the key combined with the address on your driver’s license is an open invitation to thieves to ransack your home.
Keeping a spare house key in a safe deposit box is also a bad idea, albeit for different reasons. Think about it: You only have access to your safe deposit box during normal banking hours – and only if you have the box’s key with you. If you’re like most people, your safe deposit box key is squirreled away somewhere inside your home…from which you’re currently locked out. Save yourself the aggravation and leave a spare key with a trusted neighbor (or two) or a nearby relative.
Your bank should offer up a list of what isn’t permissible to keep in a safe deposit box. Pay attention. Firearms typically aren’t allowed, nor are explosives. The same goes for illicit drugs and hazardous materials. Figure anything illegal or dangerous is a no-no.
Use common sense, but remember that different banks might have different rules, so read the fine print of your bank’s safe deposit box agreement. If still in doubt, ask your banker for clarification.