ESTATE PLANNING: Advice About Safe Deposit Boxes

ESTATE PLANNING: Advice About Safe Deposit Boxes

INTRO: In the course of handling a trust administration for two brothers whose parents had died, an issue arose about the parents’ safe deposit box.

California law governing safe deposit boxes is somewhat complicated and has important, but not well known, implications. So, I thought it might be helpful to write about the core legal and practical aspects of safe deposit boxes, including ownership/titling alternatives, access and content protection.

When a consumer rents a safe deposit box (“box”) from a financial institution (e.g. bank or credit union), the rental agreement between the parties controls the relationship. The consumer should take time to read this contract to become familiar with its terms.

Most often, the consumer party to the contract is an unmarried person or, in the case of a married couple, both spouses. While this makes sense, such titling is actually not ideal, particularly in the case of incapacity or death.

You may, for convenience, designate a co-owner (e.g. a trusted relative or friend) on the rental agreement. Such person(s) will possess a key and have unfettered access to the box, before and after your death. Consequently, you should be very cautious about whom, if anyone, you make a co-owner.

A separate potential co-ownership problem involves unintended consequences. Suppose you have two children, John and Mary, and for convenience purposes, you list John as a co-owner of the box. Suppose further that your Will states that John and Mary are to receive all of your assets, in equal shares. Contrary to your intentions, upon your death, John, as the co-owner, asserts that as the then sole owner of the box, he is legally entitled to all of its contents.

California law provides that on the death of the box owner, the institution at which the box is located may deliver the contents to certain defined people (including, but not limited to, a “relative”) if: a) the institution has no reason to believe there is a dispute over the contents; b) the person to whom the contents are delivered provides reasonable proof of identity; and c) reasonable records are kept in accordance with related rules.

These statutory rules seem logical, but can cause serious problems. Suppose that the financial institution has no reason to believe there is a dispute at a time when an untrustworthy relative comes in. Thus, the contents are lawfully delivered to this relative. The problem: you (the then-deceased owner) would never have granted access to this relative. If this relative happens to sell, hide or give away valuable or sentimental items, no satisfactory recourse may be available for the loved ones who are rightfully entitled to these items.

Other somewhat convoluted rules give certain access and control upon your death to a person who presents a key to the box. These rules are also subject to potential abuse and can create logistical problems.

Many of the above-referenced potential problems can be mitigated by having your revocable living trust own (i.e. rent) the box. If your living trust is the box owner, your named successor trustee will only have access to and control over the box when necessary and authorized by you (e.g. upon your incapacity, your resignation as trustee of your trust or your death). The successor trustee has a fiduciary duty to preserve, protect and distribute your property (including the contents of the box) in accordance with your wishes, as set forth in the trust.

If your trust owns the box, whoever is serving as your trustee at any given time can simply present the institution with a proper trust certification attesting to that fact. He or she will then be given full access to the box, without legal obstacles or the risks associated with owning the box in your own name(s) or with one or more co-owners.

Finally, however remote the risk is of loss or damage, the contents of a box are not insured by the financial institution or FDIC. Check with your insurance agent to ensure that you have applicable insurance coverage for the contents. Think hard about what items are best kept in the box vs. storing elsewhere. Finally, inventory whatever items you store in the box and keep copies of documents stored there. Taking photos or a video of the items in the box is also wise.

Mr. Silverman is an attorney with R. Silverman Law Group, 1855 Olympic Blvd., Suite 125, Walnut Creek, CA 94596; (925) 705-4474; rsilverman@rsilvermanlaw.com.

ESTATE & TRUST ADMINISTRATION: Need to find an experienced estate & trust administrator in Walnut Creek CA? Contact Robert Silverman at 925-705-4474 for legal advice on a Revocable Living Trust, “Summary” Estate Administration, Trust/Estate Beneficiary Representation and Will & Trust Disputes.

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