What you should (and shouldn't) store in a safe-deposit box

  • By Dana Dratch,
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Renting a safe-deposit box can help secure important personal documents, collectibles and family heirlooms. But it's important to make wise decisions about:

  • What items really belong in a safe-deposit box.
  • What happens if those items are lost or damaged.
  • Who has access to the box.
  • What happens to the contents should something happen to you.

If you want to be savvy with your safe-deposit box, here's what you should know.

What is a safe-deposit box?

A safe-deposit box is typically a metal box located in a secured area at a bank, and can be leased from a bank. This box can usually be accessed during normal banking hours.

You have access to your items only when the bank is open. That could mean Monday through Friday 9 a.m. to 5 p.m. with no weekend or holiday access. (If your bank has such limited hours, consider finding a better bank today.)

Why use a safe-deposit box?

A safe-deposit box can be a great place to store valuables that you don't want to store in your home.

Dave McGuinn, president of Safe Deposit Specialists, says a safe-deposit box is a great place for anything irreplaceable or that has a lot of memories tied to it.

"Just anything that would be difficult for them to obtain a copy or replace or whatever - it's the safest place they can put it," McGuinn says.

What should — and shouldn't — go in a safe-deposit box

A safe-deposit box is a good place to store anything valuable that you don't need access to regularly or wouldn't need suddenly in an emergency.

Good things to put in a safe-deposit box include:

  • Personal papers
  • Stamp or coin collections
  • Jewelry or rare collectibles
  • Important contracts and business papers

McGuinn says that can depend on each individual bank.

"It basically comes down to what the bank has got in their lease agreement that you signed and agreed to," McGuinn says.

You should not store items you might need on short notice or in an emergency. This includes passports, medical directives or durable powers of attorney, health care proxies and revocable living wills.

If you rent the box by yourself, don't store your will, trust documents or anything else your heirs might need.

Difference between a safe-deposit box in a bank vs. a home safe

McGuinn says a home safe is probably the main alternative to safe-deposit boxes.

"And I strongly discourage those because (with) home safes, there's usually no alarm system on it," he says.

McGuinn says that home safes are a good spot for items like your passport or a medical directive or an item that you want to keep away from a fire if it's fire-proof.

Are my belongings insured like my bank account?

A safe-deposit box lives within the vault of a federally insured bank or credit union. But whatever you put inside that box is not insured by the institution or the government. The Federal Deposit Insurance Corp., for example, protects only the money in your FDIC-insured bank accounts. At an FDIC-insured institution, you should be covered for the standard insurance amount. Make sure you check with your bank to confirm this and ask about your maximum coverage.

If you want insurance on the items within the box, you have to purchase it yourself. Why might you consider this? Just as with your home, thefts, fires, floods and other disasters can wreak havoc on bank vaults, too.

One common solution if you're storing valuable items: Add a special policy to your home or contents insurance policy to specifically cover those valuable items. Whether it's your diamond tiara or that collection of rare magazines, your home insurance agent can write a separate policy, called a rider, to cover specific, valuable items.

And insurers will often give you a discount for storing those pricy items in a safe-deposit box.

A personal articles floater can be added to your homeowners or renters insurance policy, McGuinn says.

A second option: There are companies that specialize in policies for safe-deposit box contents.

Other ways to protect your belongings: If you're storing items that could be damaged by water — like photos, papers or a stamp collection — seal them in water-safe, zippered plastic bags and seal those inside Tupperware or similar containers.

For things like family photos or personal papers, make copies and store them electronically, and leave instructions on how your family can access them.

Are safe-deposit boxes tax-deductible?

The elimination of the 2 percent miscellaneous deduction means that taxpayers can no longer deduct the cost of investment expenses, such as safety deposit box rentals, according to Caroline Bruckner, managing director of the Kogod Tax Policy Center at American University.

Bruckner says tax simplification was one of the goals of tax reform, and this was achieved by doubling the standard deduction. In order to make up for the shortfall, certain tax breaks, such as this one, had to be eliminated.

Who should have access to your safe-deposit box?

You can open a box for yourself alone, with one other person, or with several other people. And some institutions will accommodate as many co-lessors as you'd like.

If you select co-lessors for your box, those people will have access and rights to the contents that are equal to yours.

So someone with addictions, money problems, marriage problems or judgment issues isn't a good candidate for box access, says Ric Edelman, author of "The Truth About Money."

Some institutions will allow you to set up access so that both (or all) lessors have to be present to open it. But that's not smart or practical.

Experts say it's smart to have a designated power of attorney to handle your financial affairs — including access to your box — in case you are unable to because you are disabled or traveling, among other reasons.

McGuinn says some banks may allow you to add a person as a deputy on your safe-deposit box. According to McGuinn, you can revoke a deputy's appointment. But he says that it better be someone you trust enough to let them have access to your safe-deposit box. A deputy dissolves upon death, similar to a power of attorney, McGuinn says.

"If I bring you into the bank and I say that I want to add (you) to the box, but I don't want (you) to be able to go into it after I die and I don't want to be able to not take (your) name off, that's where a deputy is useful," McGuinn says.

10 estate plan mistakes to avoid

These warning signs can tell you if it's time to make updates to your plan.

McGuinn says that a co-tenant, on the other hand, has survivorship in most of the states that he travels to. Check with your local laws and bank to see how a co-tenant is treated upon your death.

One smart move: Keep a running inventory of your safe-deposit box — and revise it every time you put something in or take something out.

And, especially if you rent a box solo, make sure that your family or heirs know where the box is, and where to find the inventory and box key.

What happens if you die?

With several names on the safe-deposit box account, the box should remain available.

But the deceased person's executor might demand access to the box, and those situations can get sticky.

In the old days, banks would often freeze access to safe-deposit boxes on the death of one of the renters, pending instructions from a court. That's rare now.

Since that can have a big impact on what papers you choose to store, ask the institution before you rent: What happens if one of the parties on the safe-deposit box lease dies?

If institution personnel don't know or seem unsure, ask your own attorney or contact a local estate attorney.

If you alone rent the box, the box will be sealed when you die, and it could be weeks or months before it's opened. "Which means your attorney cannot gain access to that box to manage your estate," Edelman says.

An executor that you designated to handle your estate after you die would eventually get access to your safe-deposit box, but how quickly depends on the state you live in and the bank.

But how would a bank even know you're gone? Even if no one says anything directly, some institutions routinely scan obits, Edelman says.

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