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KeepUP™ Blog

3/5/21 8:41 AM

Unclaimed Property Focus: Safe Deposit Boxes

by UPPO

box and key The following blog originally posted on March 3, 2021 on the UPPO website as part of their Membership Community Blog contribution. MarketSphere is sponsoring UPPO blogs published to their site during the month of March.

Unlike most of the property types in the unclaimed property world, safe deposit boxes are an anomaly because they contain physical, tangible items. As such, handling of safe deposit boxes has a unique set of rules, requirements, and concerns.

There are two scenarios for when a financial institution would likely drill open a safe deposit box: nonpayment and relocation. In either case, state bank laws and the rental agreement between the financial institution and the customer govern how the property should be handled.

Because most consumers are likely to return to the location where they left their physical property, the state where the safe deposit is located – rather than state where the owner lives – dictates the requirements for safe deposit box handling. Familiarity with the specific requirements of the applicable state is essential.When owners violate their rental agreements by failing to pay rent, the financial institution where the box is located will usually opt to drill the box. First, the holder should make appropriate collection attempts. Because most safe deposit box fees are charged annually and property is held for long periods of time with little thought, customers may not realize they have neglected to pay. For example, if a linked bank account that was used for automatic payments for several years is closed, the customer may inadvertently neglect to link a new account. So, efforts should be made to collect payment before assuming boxes have been abandoned.

Most states set a dormancy period beginning on the date of the last rent payment, plus additional time for the holder to send a drill notification and await payment. If customers don’t respond to the drill notification, the holder may proceed with drilling.

During the drilling, most states require holders to maintain dual control. They usually specify that one or two bank personnel – in some cases a bank officer ¬– be present. A notary is also required. In some states, the notary cannot be a bank employee. Finally, the holder will need a drill vendor.

As soon as the box is drilled open, the holder and notary complete an affidavit, ensuring all of the box’s contents are listed.

It is wise to err on the side of caution and be vague with descriptions on the affidavit. For example, if there is jewelry in the box, do not make assumptions about specific components when describing the items. Instead of saying the box includes a diamond ring, list it as a yellow ring with a clear stone. Unwittingly listing low-value costume jewelry as a “diamond ring” could result in litigation with the safe deposit box holder responsible for an actual diamond.

Contents should be kept safe in a tamper-proof bag. The affidavit should stay with the contents. If you plan to place the affidavit in the bag, make sure to keep a copy elsewhere so you don’t have to open the bag later. Having a process in place to track the chain of custody is also essential. Some states require that a post-drill notification must be sent to within a set time (often 10 to 30 days) after a box is drilled.

The second scenario for drilling, relocation generally occurs when a bank branch is moving or closing. If the physical bank of boxes is being moved and not drilled, different rules apply because the holder is not technically breaking the rental agreement. Consult with applicable state laws regarding requirements for moving the entire box rather than its contents.

For relocation, notify safe deposit box owners that the branch is relocating or moving, and ask them to take their contents. Some states have specific language and mailing requirements.

Contact MarketSphere if you have questions about managing safe deposit boxes or other types of property. Our subject matter experts’ partner with holders to navigate complex escheat requirements and create strategies for long term compliance needs.

*Content contained in this article is considered accurate as of the publish date.

Topics: Compliance, Reporting, Best Practices