If you oil or grease your sheath liberally, then you can store your sword in it. If you choose to store your sword in a sheath, then you should check on it periodically. Keep you sword away from humid environments. An inside closet is best if you are storing it away from sight. This keeps the sword away from harmful contact.
Every point of contact is a potential place for water to condense.
If rust develops on your blade, you should clean it off as soon as possible. The longer you wait, the deeper the rust will pit your sword. If you clean it quickly then you can usually restore the original polish. Any brass or metal cleaner will work for carbon steel. Wooden handles may be treated with a light coating of lemon oil or tung oil to help prevent cracking.