You do not have to report foreign currency in a foreign safe deposit box to IRS !!!!!A Guide to What Is and Is Not Protected by FDIC Insurance
So - you feel your cash is safe and protected when you walk through the door of the bank or saving association, much safer than when you kept it under your mattress. And you should. BUT, are your funds all covered by FDIC insurance just because you walked into a secure-looking building with iron bars and guards? Not necessarily - it depends on which of the bank's products you decide to use and whether the bank is FDIC insured.
What Is Insured?
You are probably familiar with the traditional types of bank accounts - checking, savings, and certificates of deposit (CDs) - that are insured by the FDIC. Banks also may offer what is called a money market deposit account, which earns interest at a rate set by the bank and usually limits the customer to a certain number of transactions within a stated time period. All of these types of accounts generally are insured by the FDIC up to the legal limit of $250,000 and sometimes even more for special kinds of accounts or ownership categories. For more information on deposit insurance see FDIC brochure "Your Insured Deposits."
What Is Not Insured?
Increasingly, institutions are also offering consumers a broad array of investment products that are not deposits, such as mutual funds, annuities, life insurance policies, stocks and bonds. Unlike the traditional checking or savings account, however, these non-deposit investment products are not insured by the FDIC.
Investors sometimes favor mutual funds over other investments, perhaps because they hold promise of a higher rate of return than say, CDs. And with a mutual fund, such as a stock fund, your risk - the risk of a company going bankrupt, resulting in the loss of investors' funds - is more spread out because you own a piece of a lot of companies instead of a portion of a single enterprise. A mutual fund manager may invest the fund's money in either a variety of industries or several companies in the same industry.
Or your funds may be invested in a money market mutual fund, which may invest in short-term CDs or securities such as Treasury bills and government or corporate bonds. Do not confuse a money market mutual fund with an FDIC-insured money market deposit account (described earlier), which earns interest in an amount determined by, and paid by, the financial institution where your funds are deposited.
You can - and should - obtain definitive information about any mutual fund before investing in it by reading a prospectus, which is available at the bank or brokerage where you plan to do business. The key point to remember when you contemplate purchasing mutual funds, stocks, bonds or other investment products, whether at a bank or elsewhere, is: Funds so invested are NOT deposits, and therefore are NOT insured by the FDIC - or any other agency of the federal government.
Securities you own, including mutual funds, that are held for your account by a broker, or a bank's brokerage subsidiary are not insured against loss in value. The value of your investments can go up or down depending on the demand for them in the market. The Securities Investors Protection Corporation (SIPC), a non government entity, replaces missing stocks and other securities in customer accounts held by its members up to $500,000, including up to $250,000 in cash, if a member brokerage or bank brokerage subsidiary fails. For more information contact:
Securities Investor Protection Corporation
805 15th Street, NW Room 800
Washington, DC 20005-2215
Treasury securities include Treasury bills (T-bills), notes and bonds. T-bills are commonly purchased through a financial institution.
Customers who purchase T-bills at banks that later fail become concerned because they think their actual Treasury securities were kept at the failed bank. In fact, in most cases banks purchase T-bills via book entry, meaning that there is an accounting entry maintained electronically on the records of the Treasury Department; no engraved certificates are issued. Treasury securities belong to the customer; the bank is merely acting as custodian.
Customers who hold Treasury securities purchased through a bank that later fails can request a document from the acquiring bank (or from the FDIC if there is no acquirer) showing proof of ownership and redeem the security at the nearest Federal Reserve Bank. Or, customers can wait for the security to reach its maturity date and receive a check from the acquiring institution, which may automatically become the new custodian of the failed bank's T-bill customer list (or from the FDIC acting as receiver for the failed bank when there is no acquirer).
Even though Treasury securities are not covered by federal deposit insurance, payments of interest and principal (including redemption proceeds) on those securities that are deposited to an investor's deposit account at an insured depository institution ARE covered by FDIC insurance up to the $250,000 limit. And even though there is no federal insurance on Treasury securities, they are backed by the full faith and credit of the United States Government - the strongest guarantee you can get.
Safe Deposit Boxes
The contents of a safe deposit box are not insured by the FDIC. (Make sure you read the contract you signed with the bank when you rented the safe deposit box in the event that some type of insurance is provided; some banks may make a very limited payment if the box or contents are damaged or destroyed, depending on the circumstances.) If you are concerned about the safety, or replacement, of items you have put in a safe deposit box, you may wish to consider purchasing fire and theft insurance. Separate insurance for these perils may be available; consult your insurance agent. Usually such insurance is part of a homeowner's or tenant's insurance policy for a residence and its contents. Again, consult your insurance agent for more information.
In the event of a bank failure, in most cases an acquiring institution would take over the failed bank's offices, including locations with safe deposit boxes. If no acquirer can be found the FDIC would send boxholders instructions for removing the contents of their boxes.
Robberies and Other Thefts
Stolen funds may be covered by what's called a banker's blanket bond, which is a multi-purpose insurance policy a bank purchases to protect itself from fire, flood, earthquake, robbery, defalcation, embezzlement and other causes of disappearing funds. In any event, an occurrence such as a fire or bank robbery may result in a loss to the bank but should not result in a loss to the bank's customers.
If a third party somehow gains access to your account and transacts business that you would not approve of, you must contact the bank and your local law enforcement authorities, who have jurisdiction over this type of wrongdoing.
Checking Accounts (including money market deposit accounts)
Savings Accounts (including passbook accounts)
Certificates of Deposit
Investments in mutual funds (stock, bond or money market mutual funds), whether purchased from a bank, brokerage or dealer
Annuities (underwritten by insurance companies, but sold at some banks)
Stocks, bonds, Treasury securities or other investment products, whether purchased through a bank or a broker/dealer
For More Information from the FDIC
Call toll-free at 1-877-ASK-FDIC (1-877-275-3342) from 8 a.m. until 8 p.m. Eastern Time, Monday through Friday.
For TDD call 1-800-925-4618.
Calculate your insurance coverage on-line using the FDIC’s Electronic Deposit Insurance Estimator at: www.fdic.gov/edie
Request a copy of “Your Insured Deposits,” which provides a detailed discussion on all the ownership categories, or by calling toll free 1-877-275-3342.
Read more about FDIC insurance on-line at: www.fdic.gov/deposit/deposits/index.html
Send your questions by e-mail using the FDIC’s on-line Customer Assistance Form at: www2.fdic.gov/starsmail
Mail your question to:
Attn: Deposit Insurance Outreach
550 17th Street, N.W.
Washington, DC 20429-9990
The Key to Your Safe Deposit Box
If you think there isn't much to using a safe deposit box beyond putting keys in locks, you're in for a surprise. The safe deposit service may be tucked down in the basement or far corner of your bank, but in its own quiet way it is among the bank's most important offerings-- and among the most misunderstood.
While millions of Americans rent a safe deposit box, few pay attention to questions such as who could or should have access to a safe deposit box (especially in an emergency) and how the contents of the box are protected. About the only time people ever consider these issues is when there's a problem, and then it may be too late to prevent a loss.
To help you decide whether to use a safe deposit box, and how to use one wisely, FDIC Consumer News has put together the following questions and answers. Several of these questions came from our readers, in response to an appeal from us. We thank everyone who wrote in with questions or suggestions. (To keep things simple, our references to "banks" are intended to apply broadly to banks, savings institutions and credit unions.)
In or Out?
Why should I rent a safe deposit box?
It's a convenient place to store important items that would be difficult or impossible to replace. The box also offers privacy (only you know what's inside) and security. Although many people like to keep valuables close by in a closet, safe or file cabinet at home or in the office, these places probably are not as resistant to fire, water or theft. Also, some insurance companies charge lower insurance premiums on valuables kept in a bank's box instead of at home.
What items should go into a safe deposit box?
Any personal items that would cause you to say, "If I lose this, I'm in deep trouble." Important papers to consider putting into your box: originals of your insurance policies; family records such as birth, marriage and death certificates; original deeds, titles, mortgages, leases and other contracts; stocks, bonds and certificates of deposit (CDs). Other valuables worthy of a spot in your safe deposit box include special jewels, medals, rare stamps and other collectibles, negatives for irreplaceable photos, and videos or pictures of your home's contents for insurance purposes (in case of theft or damage).
OK, what should NOT go in a box?
Anything you might need in an emergency, in case your bank is closed for the night, the weekend or a holiday. Possible examples: originals of a "power of attorney" (your written authorization for another person to transact business on your behalf), passports (in case of an emergency trip), medical-care directives if you become ill and incapacitated, and funeral or burial instructions you make. Consider giving the originals to your attorney, and making copies to go in your safe deposit box or to give a close friend or relative.
If I have a will, shouldn't it go in my safe deposit box?
Whether your will should be at the bank or elsewhere, such as with your attorney, depends on what your state law says about who has access to your safe deposit box when you die. Ideally, the person you name to oversee your financial matters after you die (your "executor" or "personal representative") should have early access to your original will (copies aren't valid). David P. McGuinn, president of Houston-based Safe Deposit Specialists, a consultant to banks and consumer groups, says the recent trend in most states is to make it relatively easy for co-renters, family members or the executor to remove the will and certain other documents (such as life insurance policies and burial instructions) from a deceased person's safe deposit box. In those states, it's a good idea to leave your will in the safe deposit box. "But in some states," McGuinn notes, "it may require a court order or another official action to remove the will, which can take time and money. That's why you should check with a bank official to find out what is required under state law and your bank's own policies in the event of your death."
Access by Others
Can I arrange for someone to access my box in an emergency?
Yes. You can jointly rent your box with a spouse, child or other person who would have unrestricted access to the box. (Warning: In some states your co-renter may face delays in accessing the box if you die. Also, merely giving someone else a key won't be enough to grant access. He or she also must sign the bank's rental contract as a joint-renter.) An alternative is to appoint a "deputy" or "agent" (NOT a power of attorney) who will have access to your box. A deputy/agent and a general power of attorney are similar in that you may grant or revoke the authority at any time, and the appointment ends if you become incompetent or die. The main difference is that a deputy or agent is appointed in the presence of the box renters and a bank employee, which gives the bank greater assurance about the validity of the authorization. "Many people are surprised to find that a power of attorney does not allow access to a box," says Donald Sansone, a Chicago banker who specializes in safe deposit issues. "The bank has no way of knowing if the power of attorney is still in effect or if the renter was competent when the power of attorney was signed."
Can law enforcement authorities access my safe deposit box without my knowledge or permission?
Mark Mellon, an attorney with the FDIC in Washington, says that if a local, state or federal law enforcement agency persuades the appropriate court that there's "reasonable cause" to suspect you're hiding something illegal in your box (guns, drugs, explosives, stolen cash or money obtained illegally), "it can obtain a court order, force the box open and seize the contents." But what about non-criminal matters, such as a dispute with the Internal Revenue Service, a company or other people over money they say you owe? McGuinn of Safe Deposit Specialists says the IRS can "freeze" your assets (effectively placing a hold on your bank accounts and safe deposit box) until the dispute is resolved. Private parties also can freeze your assets but doing so involves going before a judge and proving that there's a legitimate dispute over a debt.
Can a box be declared "abandoned" and the contents turned over to the government?
Yes, but only if you don't pay your rental fee for a number of years (as determined by state law) and after attempts to notify and locate you prove unsuccessful. In that case, your box will be reported as abandoned and the contents will be turned over to the state's unclaimed property office. Often this happens because the renter dies and the heirs have no knowledge of the box or its contents. The good news is that even if the state has sold your unclaimed property, you or your heirs still have the right to claim its value. To contact a state's unclaimed property office (sometimes part of the treasurer's office), check the state government section in your phone book. On the Internet, go to the home page of the National Association of Unclaimed Property Administrators.
What happens to my box if my bank fails?
When an insured bank or thrift closes, the FDIC usually arranges for another institution to take it over, including branches where you might have a safe deposit box. In those situations, you should be able to conduct business as usual. If the FDIC cannot find a buyer for your bank, it arranges for you to remove the contents of your box so you can obtain a box at another institution, if you wish. This is done within a few days after the bank fails.
Are safe deposit boxes protected from fire, flood or other disasters?
The companies that manufacture safe deposit boxes and the vaults that house the boxes make them highly "resistant" to fire, flood, heat, earthquakes, hurricanes, explosions or other disastrous conditions. However, the key word here is "resistant." There's no 100 percent guarantee against damage, and substantial losses sometimes occur.
Fearing floods, a Missouri bank used a crane to move 2,000
safe deposit boxes to a safe location in 1993. (Those are
sandbags, not money bags.)
Are there extra precautions I can take to minimize damage?
Yes. McGuinn offers this advice: Prevent water damage by sealing items in airtight, zip-lock bags or Tupperware-style containers. Also, put your name on each item, keep a list of the box's contents, make copies of important documents and even take photos of your most prized items left in the box. That way, McGuinn says, if a disaster occurs your chances of successfully identifying, claiming or recovering an item would be increased.
Doesn't FDIC insurance cover the contents of safe deposit boxes if they're damaged or stolen?
No. By law, the FDIC only insures deposits in deposit accounts at insured institutions. Although you may be putting valuables, including cash and checks, into an area of the bank that has the word deposit in its name, these are not deposits under the insurance laws that the bank can use, for example, to make loans to other customers. A safe deposit box is strictly a storage space provided by the bank.
Does anyone insure my safe deposit box against damage or theft?
Unless your bank is found to be negligent in the way it handled or protected your safe deposit box, do not expect the bank or its private insurance to reimburse you for any damage or loss. If you're concerned about the safety or replacement of the items in your box, first check whether your own homeowner's or tenant's insurance policy covers your safe deposit box against damage or theft. Many do cover box contents up to a certain dollar amount, even including items lost or damaged when they're out of the box. If your home-related insurance isn't sufficient, talk to your insurance agent about additional protection or find out if your bank is among those selling limited insurance coverage on safe deposit boxes. But before buying any extra coverage, carefully review the policy and do some comparison-shopping.
Can thieves rob a safe deposit box?
Yes, it happens, but fortunately not often. Safe deposit boxes are stored in concrete or steel vaults equipped with sophisticated alarms, locks, video cameras, motion sensors, heat detectors and other security devices. Most U.S. banks also have very strict access procedures, among them: verifying signatures, restricting access to the vault, never leaving anyone unattended inside the vault, and requiring two different keys (one being the bank's "guard key") to open a box. You can do your part to prevent a rip-off by following our recommendations to consumers below.
5 Things to Know About Safe Deposit Boxes, Home Safes and Your Valuables
1. Think about what should or should not be kept in a bank's safe deposit box. Good candidates include originals of key documents, such as birth certificates, property deeds, car titles, and U.S. Savings Bonds that haven't been converted into electronic securities. Other possibilities include family keepsakes, valuable collections, pictures or videos of your home's contents for insurance purposes, and negatives for irreplaceable photos. (Another option may be to store digital images of important documents and photos on a secure Web site that you can access from anywhere over the Internet.)
You probably wouldn't want to use your bank safe deposit box to store anything you might need to access quickly, perhaps on a night, weekend or holiday. That could include passports and originals of your "powers of attorney" that authorize others to transact business or make decisions about medical care on your behalf. For guidance on where to store your original will, check with an attorney about what is required or recommended based on state law.
2. You're better off stashing your cash in a bank deposit account, like a savings account or certificate of deposit, than in a home safe or a safe deposit box. "Unlike money in a savings account, money in a home safe or safe deposit box cannot earn interest, so the purchasing power of your cash will decrease," said Luke W. Reynolds, Chief of the FDIC's Community Outreach Section. "Plus, cash that's not in a deposit account isn't protected by FDIC insurance." (See #5 for more about the potential risks.)
3. A home safe isn't a true replacement for a bank's safe deposit box. A home safe may be good for replaceable items you may need immediate access to – such as a passport – but home safes are not as secure as safe deposit boxes. "A burglar could more easily break into your home, force you to open the safe or haul off the entire safe and access the contents than get inside your safe deposit box," said Reynolds.
4. If the bank fails, you'll still have quick access to your safe deposit box. In general, the full contents of your box should be available the first business day after the bank closes.
5. No safe deposit box or home safe is completely protected from theft, fire, flood or other loss or damage. Consider taking precautions, such as protecting against water damage by placing items in plastic containers or zip-lock bags. And, don't keep identifying information on or near your safe deposit box key, such as the box number and the bank's name, in case of loss or theft. Remember that, by law, FDIC insurance covers only deposit accounts. Also, don't expect the bank to reimburse you for theft of or damage to the contents of your safe deposit box. If you want protection for the valuables in your safe deposit box or home safe, talk to your insurance agent.