When you’re looking for a place to store cash, important documents or other valuables, a safe deposit box is one option to consider. Safe deposit boxes can be an alternative to keeping a safe at home, although they may not be right in every situation. Before signing up for a safe deposit box, it’s helpful to understand how they work, what they cost and when it makes sense to use one.
A safe deposit box is a secure container that you can rent to store important items. These boxes, which can be rented at either brick-and-mortar banks or credit unions, come in different sizes and are typically made of metal. Depending on the financial institution, they can be as small as 3 x 5 inches or as large as 10 x 15 inches.
Safe deposit boxes are kept in a secure vault at a bank or credit union branch. Typically, it takes two keys to open a safe deposit box: your key, plus a key that your bank or credit union retains. To access what’s in your safe deposit box, you’ll need to go to the branch, show proof of identity and provide your key. As the owner of its contents, only you, and not the bank, know what’s held inside it. (The bank or credit union does not hold a copy of your personal key; only you do.)
Safe deposit boxes can be used to store items that you may not want to keep anywhere else, including a home safe.
Having a safe deposit box could offer reassurance if you’re concerned about any of your valuables being lost or stolen or documents being destroyed. For instance, if you’ve drafted a last will and testament or trust document, you may want to give a copy to your estate planning attorney and keep another copy in your safe deposit box.
The same could apply if you’ve drafted important contracts for a business you own. In a nutshell, safe deposit boxes are a way to ensure that your valuables are physically safe and secure in the bank’s keeping.
Safe deposit boxes can be used to store a number of items, but banks can impose guidelines on what can be kept inside them. Some of the things you might add to a safe deposit box include:
Technically, you could keep cash in a safe deposit box, but the FDIC doesn’t advise it. This mainly has to do with the limited protections extended to safe deposit boxes. But it’s also important to remember that cash sitting in a box isn’t earning interest the way it could if you kept it in a savings account, money market account or certificate of deposit account instead.
The kinds of things that banks typically prohibit people from storing in safe deposit boxes include:
When you open a safe deposit box, the bank should present you with a lease agreement spelling out how long you’ll have access to the box, what you’ll pay for it and what you can or can’t add to it. The lease agreement may also include a clause stating that, if the bank believes the contents of the safe deposit box are unsafe, they can force it open and dispose of whatever is inside, charging any disposal fees to you.
Banks and credit unions typically charge a fee for renting a safe deposit box. This fee usually corresponds to the size of the box, with larger boxes costing more.
Safe deposit box fees can be charged monthly or annually, depending on the terms of the lease set by the bank. At the lower end, you may pay around $40 a year for the smallest size safe deposit box. At the higher end, the largest boxes could cost you upward of $300 a year, depending on the bank.
Some banks also may charge an initial deposit when leasing a safe deposit box. It’s important to review the lease agreement to understand what the fees are and when they apply.
For example, the agreement may specify that the annual rent must be paid in full one year in advance. If rent for a safe deposit box isn’t paid on time, then an additional late fee or penalty could kick in. And if you lose your keys to the box and the bank has to have a locksmith open it, then you may be responsible for those fees as well. Failure to pay rent could result in the bank terminating your lease contract.
It’s possible to open a safe deposit box with more than one person. This can be done initially when the box is leased. In that instance, all parties involved are considered co-renters.
Renters also can be added after the fact. This usually involves the new renter’s visiting the bank, providing ID and signing paperwork agreeing to be added as a co-renter. In either case, co-renters would each have their own key to the box and be able to store things inside it.
Co-renters share equally in the contents of the box as well as any liability associated with the box. Sharing a safe deposit box with a spouse or someone else can be convenient if you both have an interest in what’s inside it. For example, you and your spouse may decide that you want to keep copies of your wills and family heirlooms in the same place.
But that also means that any co-renter can take items out of the safe deposit box without having to okay it with other co-renters first. This could lead to problems, since the bank takes no part in settling disputes between co-renters.
When opening a savings account, money market account or any other type of account at a bank that’s FDIC insured, you enjoy certain protections. Specifically, if the bank fails, the FDIC will reimburse any money in your accounts up to federal limits.
Safe deposit boxes, on the other hand, don’t work that way. Since they’re not technically deposit accounts, they’re not covered by FDIC rules, and banks don’t have to provide any type of insurance independently. The FDIC advises banking customers that no safe deposit box is 100% protected against things like theft, fire, floods or other types of damage resulting in losses.
Since protections are limited for safe deposit boxes, banks may advise customers to take their own safety precautions. For example, that may include keeping a detailed inventory of the box’s contents, along with photographs of what’s inside and individually insuring valuables, such as jewelry or collectibles.
Safe deposit box lease agreements can include provisions for what happens if the person leasing the box passes away or files bankruptcy. For instance, if the person dies, the bank can allow other people to access the box if it’s required to obtain necessary documents, such as a will or deeds to property. This usually requires official court documentation and may be limited to the deceased person’s executor or trustee.
If the box has a surviving co-renter, the bank can temporarily block access to it from third parties until the co-renter gives their consent. The bank doesn’t have to determine ownership of what’s inside a safe deposit box if one renter passes away. It’s important to keep in mind that how safe deposit boxes are handled when someone dies can ultimately depend on the probate laws in their state. In the case of a bankruptcy filing, the bank can allow access to the box by third parties when court documentation is provided.
Whether to use a safe deposit box can depend on several factors, including what you want to store in the box, the value of those items and whether they’re insured in any way. Safe deposit boxes can keep your items safe, though it’s important to remember that they’re not foolproof.
If you’re considering leasing a safe deposit box, take time to read through the terms of the lease agreement so you understand how much you’re paying, what you can or can’t keep in the box and what your rights and responsibilities are. You also should consider how long you want to keep the box and check the contents at least once annually if you plan to have it for more than a year.
Finally, it may be a good idea to let your family know you’ve opened a safe deposit box. Though you don’t have to tell them what’s in it, letting them know you have one is important for estate planning purposes in case something happens to you unexpectedly.