Safety of Safe Deposit Boxes

[WildAboutHarry]

The State Treasurer of Massachusetts is auctioning off a bunch of gold coins on The Bay.  All seized from "abandoned" safe deposit boxes.

The seller name is state.treasurer.grossman.

Just one more thing to worry about.  What next?

[MediumTex]

I wonder how many people in the U.S. in the last 20 years have suffered a loss due to a safe deposit box theft.

I don't have a feel at all for how often safe deposit boxes are subject to theft.

[Gumby]

We've talked about this a few times before.

http://gyroscopicinvesting.com/forum/ht ... 84#msg4284

Accidentally abandoning your safe deposit box is probably the biggest problems with these boxes. Many states have reduced the official abandoned property timelines from 15 years to 3 years to raise capital — since State budgets are tighter. So, you need to make sure you visit your box every few months and keep a paper trail of all timely payments. Your box requires that kind of regular maintenance to prevent it from being considered abandoned.

Every state has an "unclaimed property" search. So, technically you should be able to recover your box shortly after it's been seized as unclaimed property. But, one it's been auctioned, I believe you can only claim the value of the box. Anything of sentimental value will be gone. No idea how they value the box, but I suspect the auction sale has something to do with it.

[WildAboutHarry]

Accidentally abandoning your safe deposit box is probably the biggest problems with these boxes. Many states have reduced the official abandoned property timelines from 15 years to 3 years to raise capital — since State budgets are tighter. So, you need to make sure you visit your box every few months and keep a paper trail of all timely payments. Your box requires that kind of regular maintenance to prevent it from being considered abandoned.

Three years can go by rather quickly, and banks have been known to make mistakes   Yet another counter party risk.

The State acquires unclaimed property through California's Unclaimed Property Law, which requires "holders" such as corporations, business associations, financial institutions, and insurance companies to annually report and deliver property to the Controller's Office after there has been no customer contact for three years.

I have not dug further, but I wonder what constitutes "customer contact"?  If I prepay the box rent for ten years do I still have to traipse down to the bank and visit the box at a less than three-year interval?  I assume so.

[Tortoise]

Accidentally abandoning your safe deposit box is probably the biggest problems with these boxes. Many states have reduced the official abandoned property timelines from 15 years to 3 years to raise capital — since State budgets are tighter. So, you need to make sure you visit your box every few months and keep a paper trail of all timely payments. Your box requires that kind of regular maintenance to prevent it from being considered abandoned.

Every few months? I thought once a year would be sufficient.

Maybe I'm missing the concern here, but don't most banks have a policy of at least trying to contact the safe deposit box's owner by phone, mail, and e-mail before they resort to confiscating its contents? If not, then that's a pretty shady policy--more akin to theft than "confiscation of abandoned property."

Banks have their customers' contact information. So what is the basis of the concern here, other than situations where a person changes all of their contact information and fails to inform their bank? If someone does that, yet they still have significant assets in a safe deposit box at that bank, I'm not sure I'd have much sympathy for them if their box is confiscated as abandoned property--because it kind of is.

Now, people who happen not to have checked their safe deposit boxes in a mere few months, and they still have all their current contact info with the bank, yet the bank assumes their box is abandoned... that would just be straight up unprofessional of the bank. Maybe even criminal.

[Gumby]

Accidentally abandoning your safe deposit box is probably the biggest problems with these boxes. Many states have reduced the official abandoned property timelines from 15 years to 3 years to raise capital — since State budgets are tighter. So, you need to make sure you visit your box every few months and keep a paper trail of all timely payments. Your box requires that kind of regular maintenance to prevent it from being considered abandoned.

Every few months? I thought once a year would be sufficient.

Maybe I'm missing the concern here, but don't most banks have a policy of at least trying to contact the safe deposit box's owner by phone, mail, and e-mail before they resort to confiscating its contents? If not, then that's a pretty shady policy--more akin to theft than "confiscation of abandoned property."

Banks have their customers' contact information. So what is the basis of the concern here, other than situations where a person changes all of their contact information and fails to inform their bank? If someone does that, yet they still have significant assets in a safe deposit box at that bank, I'm not sure I'd have much sympathy for them if their box is confiscated as abandoned property--because it kind of is.

Now, people who happen not to have checked their safe deposit boxes in a mere few months, and they still have all their current contact info with the bank, yet the bank assumes their box is abandoned... that would just be straight up unprofessional of the bank. Maybe even criminal.

If we lived in a world where everyone played by the rules, I would agree with you. Unfortunately, we live in an uncertain world, as HB would say.

Here is one example, as reported by ABC News:

San Francisco resident Carla Ruff's safe-deposit box was drilled, seized, and turned over to the state of California, marked "owner unknown."

"I was appalled," Ruff said. "I felt violated."

Unknown? Carla's name was right on documents in the box at the Noe Valley Bank of America location. So was her address -- a house about six blocks from the bank. Carla had a checking account at the bank, too -- still does -- and receives regular statements. Plus, she has receipts showing she's the kind of person who paid her box rental fee. And yet, she says nobody ever notified her.

"They are zealously uncovering accounts that are not unclaimed," Ruff said.

To make matters worse, Ruff discovered the loss when she went to her box to retrieve important paperwork she needed because her husband was dying. Those papers had been shredded.

And that's not all. Her great-grandmother's precious natural pearls and other jewelry had been auctioned off. They were sold for just $1,800, even though they were appraised for $82,500.

"These things were things that she gave to me," Ruff said. "I valued them because I loved her."

Bank of America told ABC News it deeply regrets the situation and appreciates the difficulty of what Mrs. Ruff was going through. The bank has reached a settlement with Ruff and continues to update its unclaimed property procedures as laws change.

Source: ABC NEWS: Not-So-Safe-Deposit Boxes: States Seize Citizens' Property to Balance Their Budgets

I'm willing to bet that "accidents" like that probably happen a lot more these days than they used to. The longer you wait to discover your gold's been seized by the state, the less chance you have of getting it back.

How hard is it to pop into your bank 2 or 3 times a year?

[FarmerD]

Accidentally abandoning your safe deposit box is probably the biggest problems with these boxes. Many states have reduced the official abandoned property timelines from 15 years to 3 years to raise capital — since State budgets are tighter. So, you need to make sure you visit your box every few months and keep a paper trail of all timely payments. Your box requires that kind of regular maintenance to prevent it from being considered abandoned.

Every few months? I thought once a year would be sufficient.

Maybe I'm missing the concern here, but don't most banks have a policy of at least trying to contact the safe deposit box's owner by phone, mail, and e-mail before they resort to confiscating its contents? If not, then that's a pretty shady policy--more akin to theft than "confiscation of abandoned property."

Banks have their customers' contact information. So what is the basis of the concern here, other than situations where a person changes all of their contact information and fails to inform their bank? If someone does that, yet they still have significant assets in a safe deposit box at that bank, I'm not sure I'd have much sympathy for them if their box is confiscated as abandoned property--because it kind of is.

Now, people who happen not to have checked their safe deposit boxes in a mere few months, and they still have all their current contact info with the bank, yet the bank assumes their box is abandoned... that would just be straight up unprofessional of the bank. Maybe even criminal.

I think you're making the mistake of believing bankers are honest.  Some are, some aren't.  My dad had his safe deposit box stolen by his local bank years ago.  He had kept his coin collection from the Depression era (silver coins) in a safe deposit box.  Didn't check the box for maybe 10 years then when he finally checked it, found out the bank had stolen it.  This despite the fact the bank people personally knew him and had done numerous transactions with him over the ten year period.  When he asked why they simply hadn't called him (he lived on a ranch for 30 years just outside of town of about 400 people) to let him know they were going to seize his box, they replied, "Because we aren't required to do that." 

[Ad Orientem]

Time to play Devil's Advocate here.

For all of the horror stories about banks or the state wrongly seizing the contents of safe deposit boxes, these things are NOT common occurrences.  Point in fact they are very rare.  On those occasions when they do occur they are actionable and civil damages, sometimes including punitive damages, can be sought.  But my guess is somewhere around 99% + of seized boxes are because someone legitimately did not bother to check the box for multiple years and moved without leaving contact information with the bank.  Or they died without bothering to tell anyone they had a safe deposit box or making any mention in their will. 

At the risk of sounding unsympathetic, (I probably am, but oh well) if you can't be bothered to check a safe deposit box at least annually that has very valuable things in it like gold coins or bullion then you may be setting yourself up for some problems.  This is not rocket science.  Why do people get upset when they discover that someone else has no more regard for their property than they themselves do?  Simple rules for SD boxes. 

1. Keep a detailed inventory of what's in it with a copy in the box and another at home.
2. Check the box at least semiannually.
3. Check to make sure the rent is paid up at least a year in advance at each visit and verify that the bank has your current and correct contact information.
4. Make sure the SD is referenced in your will and that your attorney or executor knows of its existence.
5. Keep records of your visits and of rent payments to the bank along with a hard copy of the rental agreement.

On a counter point, if you don't store your gold in an SD, then where will you keep it?  As I mentioned in a post on another thread (http://gyroscopicinvesting.com/forum/ht ... 7#msg19217)

1. Storing any significant quantity of gold at home is ALWAYS high risk.  I don't care how fancy your security system is, how many dogs with big teeth you have, or how many firearms you keep on your person and in every room of the house.  Violent home invasion is a far more common crime than bank robbery these days.  Even if you manage to repel the attack without you or loved ones getting killed, is it really worth it?  And seriously, who wants to live in a fortress?

2. Bank robbery has gone out of style like bell bottom pants.  Serious (read smart) crooks don't rob banks anymore.  The risk reward ratio really sucks.  The incidence of unsolved bank robbery in the US is among the lowest for major crimes.  There are just too many ways of getting caught and the FEDS get involved right away.  Most bank robberies these days are done by idiots in need of some quick cash or who are trying to make a name for themselves on the street.

3. In line with #2 above the idiots who do rob banks almost never go near the safe deposit boxes, and for good reasons.  As noted in an earlier post they would need to know what was in which boxes and there are so many.  They would need sophisticated means to break into them and they would need TIME unless they knew which box(es) to hit.  Time is a luxury bank robbers don't have.

All of which said, I am a big fan of diversification.  One easy way to reduce risk is to store your physical in more than one safe deposit box at different bank branches.  The added expense is minimal.  As for gold confiscation, while I would hesitate to rule anything out, I view that as an extremely low risk.  The US is too big to undertake large scale gold confiscation without wreaking havoc on global financial markets.  Huge numbers of Americans own gold stored overseas, either directly or via ETFs.  The implications of an attempt to to seize all of that are mind boggling.  I need an aspirin just thinking about it.  Bottom line: It's not 1933 anymore.  The world and the US have changed.  And so has case law and the composition of the Supreme Court.  I seriously doubt confiscation would fly in the courts today.

[Tortoise]

Well said, Ad Orientem.

While I appreciate the general point of the article Gumby referenced, I am also skeptical of most "sob story"-style articles. By their very nature they tend to deal with extremely limited sample sets (often to elicit an emotional response from the reader) rather than broad, verifiable trends.

Also, the article didn't mention exactly how long it had been since the woman had last checked the contents of her safe deposit box. It may very well have been several years, which might help explain why her box was mistaken as abandoned property despite her paying its rent regularly and keeping her contact info at the bank current.

That being said, I suppose I do agree with Gumby that it doesn't hurt to visit one's safe deposit boxes at least two or three times per year instead of just once a year. It's a relatively insignificant investment of time that increases one's peace of mind and hopefully builds a relationship with the bank's staff in a way that once-a-year visits don't.

I also can't argue with HB's recommendation to have multiple safe deposit boxes at different bank branches. It's not as simple as having just one, but it does seem like the benefit of diversifying one's branch-specific risks exceeds the slight increase in complexity.

You know, it's funny... although I've been 100% in the HBPP since last November, I have yet to fully implement HB's purist vision of the PP in which everything that can be held directly is held directly and everything that can be diversified is diversified. But I'm gradually coming around to HB's way of thinking on just about every aspect of the PP. Every time I think one of my slight deviations from a pure HBPP is "good enough," some great discussion erupts on this board that results in me realizing there's really no substitute for the real deal.

[WildAboutHarry]

While I appreciate the general point of the article Gumby referenced, I am also skeptical of most "sob story"-style articles. By their very nature they tend to deal with extremely limited sample sets (often to elicit an emotional response from the reader) rather than broad, verifiable trends.

There are about one hundred lots up on The Bay as I type this from the State of Massachusetts (and at least as many yesterday).  I don't know whether this is from one (I doubt it) or 100 (I doubt that too) safe deposit boxes, but it is likely dozens.  I don't know what time period is represented by the collection of this abandoned property.

But this suggests that "abandonment" of safe deposits is a fairly common occurrence in the Commonwealth of Massachusetts (I'm not picking on Massachusetts, it is just the example at hand), and I suspect that is the case in some other states as well.

The absence of clear guidelines on what constitutes "abandonment" (visit the box once a year? semi-annually? twice quarterly?), the possibility of erroneous reporting of abandoned property by banks, etc. constitute additional risk in using safe deposit boxes that a casual user might not consider.

[Lone Wolf]

That being said, I suppose I do agree with Gumby that it doesn't hurt to visit one's safe deposit boxes at least two or three times per year instead of just once a year. It's a relatively insignificant investment of time that increases one's peace of mind and hopefully builds a relationship with the bank's staff in a way that once-a-year visits don't.

I view these annual (or whatever) trips as an opportunity to stare lovingly at your personal pile of loot and whisper "My preciousssssssssss..."

Nobody judges you in the safety deposit box viewing room.

[KevinW]

But I'm gradually coming around to HB's way of thinking on just about every aspect of the PP. Every time I think one of my slight deviations from a pure HBPP is "good enough," some great discussion erupts on this board that results in me realizing there's really no substitute for the real deal.

No kidding.

[HB Reader]

I tend to agree that the concerns about bank SD boxes are a little overblown.  I've had SD boxes for nearly 40 years in many different states and never had any hint of a problem.  Just be sure to visit a couple of times a year and make sure you pay your rent on time.  It also doesn't hurt to maintain a small checking or savings account at the bank from which the rental can automatically be debited.  If it still makes you nervous, by all means diversify with a second box in another bank and use one or more other storage options.  Nothing is perfect, but a combination of the alternatives discussed on this forum will come as close as you are likely to get.  The advice to reference your SD box in your will and keep a written (or photo) inventory is also good.

FWIW -- For a number of years I dealt in a professional capacity with several of the larger state abandoned property and escheat agencies in the US and these people were not the reckless cowboy bureaurcrats out to solve their state budget problems on the backs of innocent citizens as portrayed in some of the news articles.  I'm not suggesting that you shouldn't be wary of their legal powers, just use some common sense and don't take these rare horror stories out of context and become paralyzed into inaction.  Although bureaurcrats, I'd trust most state public officials in the US over journalists in search of sensational stories.

[TripleB]

I have a huge problem trying to visit a safe deposit box on a regular basis. I move frequently and travel a lot for work. It's a huge hardship for me to check a box more regularly than every few years.

The alternative would me transporting very expensive items across state lines every time I move so that the box could be in my current city. I find that unacceptable.

I plan to spend a few years abroad. Should I have to visit my safe deposit box annually? Fly in to the states just to check the box and leave?

I made a suggestion on Fat Wallet Forums a few years back that people thought was a joke. Keep some baking soda in zip lock bags, wrapped to look like drugs, inside your safe deposit box.

The police will be called in when the bank tries to seize your contents and finds something that resembles drugs.

I highly doubt you could be charged with possession/intent for having fake drugs in a safe deposit box that was drilled open improperly by the bank. Even if you are charged, having no criminal record, and with the totality of circumstances, there's no jury in the world that would convict you.

Then sue the bank for civil charges relating to the criminal suit.

Of course the goal is NOT to make a ton of cash off the bank for leading to a false arrest. The goal would be that the police would be called, and then a slightly bigger effort would be made to locate you. Perhaps they might even call the phone number that you left in the box on bright orange paper for emergency purposes (instead of just shredding it and seizing your contents as in the aforementioned described case).

Then when you show up, the police do a field test on the drugs, determine it's not drugs, and you're free to go.

Or maybe you store some spices in there that look like marijuana. Or a legally owned firearm. Perhaps a legally owned silencer with Class 3 ATF paperwork. The bank cannot auction off Class 3 firearms and will be forced to call the ATF, who will then make at least a rudimentary effort to contact you. You can get a .22lr silencer for under $500. Between that and some white powder in a baggie, and a laminated card with your contact info, as well as contact info of several friends, and perhaps your attorney/accountant, you're virtually assured that any seizure will result in you being contacted.

Maybe even a DVD with "Kiddie Pr0n" scribbled on the disk, with 5GB of encrypted photos of landscapes, that you willingly turn the password over to police when they request. Be creative.

If you want to be really sure they contact you, put a copy of the Quaran in there. Just kidding!

The cost can be low to do a few of these things, so even if the "risk" probability is low, it's worth doing.

[MediumTex]

I suppose you could put a note in there with your attorney's card saying to call him/her if you can't be located (like you were planning for the possibility that you might have died).

I would think they would be somewhat less likely to ignore something like this.

There are certainly an interesting range of options outlined above.

[KevinW]

I have a huge problem trying to visit a safe deposit box on a regular basis. I move frequently and travel a lot for work. It's a huge hardship for me to check a box more regularly than every few years.

This seems like a rare scenario where physical gold may just not make sense.

If I were you, and I were set on storing coins somewhere, I'd brainstorm outside-the-box solutions.  Is there a bank with safe deposit boxes within a block of a hub airport you fly through all the time?

Maybe there's a service that rents out space to that's accustomed to being visited rarely.  RV deep storage?  A collocated computer server?  A locker at a country club?

[MediumTex]

I have a huge problem trying to visit a safe deposit box on a regular basis. I move frequently and travel a lot for work. It's a huge hardship for me to check a box more regularly than every few years.

This seems like a rare scenario where physical gold may just not make sense.

If I were you, and I were set on storing coins somewhere, I'd brainstorm outside-the-box solutions.  Is there a bank with safe deposit boxes within a block of a hub airport you fly through all the time?

Maybe there's a service that rents out space to that's accustomed to being visited rarely.  RV deep storage?  A collocated computer server?  A locker at a country club?

When the pirates had this problem they buried their treasure.

Would that be an option, prehaps with some kind of geo-cache coordinates for later retrieval?

[Ad Orientem]

I have a huge problem trying to visit a safe deposit box on a regular basis. I move frequently and travel a lot for work. It's a huge hardship for me to check a box more regularly than every few years.

This seems like a rare scenario where physical gold may just not make sense.

If I were you, and I were set on storing coins somewhere, I'd brainstorm outside-the-box solutions.  Is there a bank with safe deposit boxes within a block of a hub airport you fly through all the time?

Maybe there's a service that rents out space to that's accustomed to being visited rarely.  RV deep storage?  A collocated computer server?  A locker at a country club?

TripleB,
I agree substantively with Kevin's observation.  It's unfortunate but the optimal investment path is not always going to work for 100% of those seeking to follow the PP.  Sometimes reality gets in the way of the ideal.  In your case I think I would forgo the safe deposit box.  It sounds like a pain in the @$$, and no part of the PP should be.  Happily you do have options, quite a few actually.  Here are a few that I am thinking of off the top of my head with their pros and cons...

1. A Bullion Backed ETF:  Pros... IAU or a similar fund (I am not a fan of GLD for reasons I don't want to get into right now) does a pretty decent job of tracking the price of gold, it eliminates concerns over storage and the necessity to check on your SDB, and its expenses are pretty reasonable.  Cons... There is counterparty risk.  IAU doe not lend out its gold and it appears to be on the up and up with regular audits.  But there is no risk free investment or method of gold storage.  That said I believe the counterparty risk to be low and the convenience level high.  Of greater concern to me is that this method could leave you exposed in the event of catastrophic scenario where financial markets are closed.

2. Private High Security Storage: There are quite a few companies all over the country that offer private high security storage.  Pros... it allows you to have physical ownership and may eliminate the need for routine visits.  Cons... you are likely to pay a steeper storage fee and you really need to do your homework, checking out the company's reputation and the security arrangements.  Having an insurance policy in this scenario would be very important.  Counterparty risk if you do your homework is probably low. Convenience level is moderate and cost is variable.

3. Physical Gold Storage Account at a Bank: This may be the best and safest form of storage, especially if you are planning on acquiring a significant amount of gold.  There are a lot of considerations however that are connected with this and rather than try to go over them all I will simply suggest you go here... http://www.galmarley.com/FAQs_pages/kee ... e_faqs.htm  and read for yourself.

4. PRPFX: This fund is discussed in voluminous detail elsewhere on this forum and I am not going to go into all of its pros and cons beyond a very few quick points.  It is NOT the Harry Browne PP.  That said it is probably the 2nd best choice for people who either by choice or circumstantial necessity don't want to do the HBPP right now.  I would strongly recommend reading the posts on the forum covering PRPFX before putting any money into it.  IMO the counterparty risk is low (they own their gold and silver physically) with somewhat high expenses compared to the HBPP.  The convenience level is about as high as you can get since you don't really even have to worry about rebalancing.  An added advantage is that PRPFX is extremely tax efficient.  However like IAU you could be left exposed in the event of a catastrophic event.

I hope the above helps.

[stone]

Some people on here have said that they use Bullion Vault. Might that be an option?

[Gumby]

See: Bloomberg: Hiding Gold in All the Unusual Places

...and the corresponding video mentioned in the article: YouTube: [Self] Gold and Silver storage, to do's and not to do's

[Ad Orientem]

See: Bloomberg: Hiding Gold in All the Unusual Places

...and the corresponding video mentioned in the article: YouTube: [Self] Gold and Silver storage, to do's and not to do's

Gumby
Thanks for posting that article.  It's a classic and I am bookmarking it.  I am still laughing.  Best part...
[url=http://"People have to be extraordinarily secretive," Krasilovsky says. This secrecy keeps away not only thieves but also prying relatives and the tax man. "One of the benefits of owning precious metals is nobody knows you own it," Venzke says. "It’s the most private investment you can make."

Unless, of course, you feel compelled to post youtube videos sharing insights about where to stash your gold.]"People have to be extraordinarily secretive," Krasilovsky says. This secrecy keeps away not only thieves but also prying relatives and the tax man. "One of the benefits of owning precious metals is nobody knows you own it," Venzke says. "It’s the most private investment you can make."

Unless, of course, you feel compelled to post youtube videos sharing insights about where to stash your gold. [/url]

On a serious note though, the article reinforces what I said in my post on the first page.  Home storage of gold is always high risk.  There is no risk free storage arrangement.  But keeping it in your home or burying it is a really bad idea.

[Ad Orientem]

Oh FAIL.  My block quote did not work...  note to self: PREVIEW before hitting post.

[AdamA]

...and the corresponding video mentioned in the article: YouTube: [Self] Gold and Silver storage, to do's and not to do's

I watched the video first, and initially thought you saying this was good advice.

[Gumby]

Heh... No. It's certainly not for everyone.

I mean, I was impressed by how much thought he put into his scheme (PVC pipe, with layers of bark, and all). But, I certainly wouldn't recommend that as a failsafe approach. Certainly don't document it on YouTube!

[Ad Orientem]

Some people on here have said that they use Bullion Vault. Might that be an option?

Bullion Vault is an option.  Their storage fees are quite reasonable but there are added fees for things like insurance, as also buying and selling for cash settlement.  And if you want to take physical delivery there are also fees which can be significant.