The power of attorney authorization letter is a legal document that gives another person the power to act and make decisions on behalf of someone else in accordance with the terms of the document. Usually, the party being granted this authority is referred to as the ‘agent’. Some of the activities an agent can undertake to include monetary transactions, property dealings, and even signing cheques. When the agent acts in the place of the original person, his activities are binding legally to the original person.
What is an Authorization Letter?
An authorization letter is a written endorsement that gives another person the right, authority, mandate, or capacity to act on your behalf to enter into a contract, spend a certain amount, take action, delegate his or her responsibilities, and do other matters you want them to look into. A letter of authorization is necessary for instances where the writer of the formal letter is unable to represent themselves for some given valid reasons.
Difference B/W Power of Attorney and Authorization letter
These two letters are very similar, but the main difference comes in the scope. A letter of authority authorizes someone to act on someone’s behalf for a given specific purpose. The assignee of the letter of authority should cancel the letter upon completion of the tasks assigned. On the other hand, the power of attorney authorization letter gives the assignee powers to act over a wide range of transactions.
Reasons to Designate a Power of Attorney
There are quite a several reasons to designate a power of attorney, and among the reasons are the following:
- In instances where bank accounts have two or more names.
- If brokerage accounts have two or more names.
- In situations where the principal is single and is out of town.
- If the principal is having or is scheduled to have major surgery.
- In instances where a property is owned by two or more individuals.
While the principal grants a power of attorney over their dealings to an agent, they can still be held accountable for their dealings. They can revoke the power of any attorney at any specific time. If the owner of the property dies, the money, shares, and property are transferable to the benefactors of the will.
And on the other hand, if they become incapacitated, the joint owner is left with very limited authority over the property’s share unless they are entitled to a power of attorney.
Types of Power of Attorney
There are several different types of power of attorney, depending on your situations that are specifically designed to help you. The different forms of power of attorney allow people the flexibility to know that their affairs are being looked after by someone they can completely trust. The following are the different types of power of attorney that you can choose from depending on the requirements of your current situation.
- A Non-Durable Power of Attorney
This form of power of attorney is used only for a given period and is often used for a certain transaction in which you allow your agent the authority to act on your behalf. The transaction is immediately completed, or if the principal becomes incapacitated during this period, a power of attorney ceases.
It is used to grant another person the authority to make important decisions and take actions on your behalf. It is more encompassing compared to the non-durable power of attorney.
The decisions that the authorized person may resolve include financial, business, and real estate affairs. A durable power of attorney doesn’t cease upon the death of the principal and does not expire after a given set of time. It actually becomes effective immediately upon the incapacitation of the principal.
Special/limited power of attorney is usually used on a limited basis, such as for one- time banking or financial transactions to sell a given property. In most cases, a limited power of attorney is used when the principal is incapacitated or is unable to complete the transactions due to his/her prior commitments or illness and wishes to appoint a trusted individual to act on his or her behalf. The agent only has the authority to act on behalf of the principal over what is assigned to them and no other matters, as this is the only scope and limitation of the stipulation.
- Springing Power of Attorney
This can be durable or non-durable. Springing power of attorney encompasses any number of affairs that the principal wishes to assign to their trusted agent. Springing power of attorney becomes operative at a future time after the occurrence of specific events.
These events include; the incapacitation of the principal, when the principal is out of the country, or when the principal is unable to act upon it. Therefore, this power of attorney will only take effect (spring out) upon the occurrence of certain events that must be specified in the professional letter. This should be detailed to avoid confusion and misunderstanding between the parties involved.
A medical power of attorney bestows authority to the agent to take definite control over the health care decisions of the primary whenever they are unable or are incapacitated to do so.
The medical power of attorney typically takes effect upon the consent of the presiding physician. The medical power of attorney permits the agent to authorize all the medical decisions with regard to the principal. All these details must be clearly stated in the letter of authorization to avoid misunderstandings and confusion between the involved parties or the general contractor.
Contents of Power of Attorney Letter
The main contents include:
- Name, signature, and address of the principal.
- Name, signature, and address of the agent.
- Properties and activities under the authority of the agent.
- Date of effect and termination of authority.
- Compensation to services of the agent.
- Name, signature, and address of the person witnessing the signing.
Sample Power of Attorney Letter
I, (principal name) (principal’s address) being of sound mind, hereby appoints (agents name) (agents address) as my one true attorney, in fact, to act in name, place, and stead to perform the following:
a) Authority 1
b) Authority 2
The following buildings interests or rights shall be subject to the agreement :
a). XYZ building
b). XYZ tower
The Power of Attorney will be on effect on this date of (Date) and will be terminated on the date (Date).
My agent will be compensated for his services as follows:
The Power of Attorney will be guided by the laws of the land of [Name]. In Witness whereof, I have signed this on my own free will.
Agreed to and signed by
Subscribed and signed to in front of me on this day of (Date).
(name of witness).
Examples & Templates (Free Downloads)
A power of attorney authorization letter is essential whenever you need someone to act on your behalf to complete tasks that you are unable to do due to certain valid reasons.
The contents of a standard power of authorization letter include the signature, name, and address of the principal; name, address, and signature of the agent; properties and activities under the authority of the agent, compensation to the services of the agent; date of effect and termination of the authority; name, signature, and address of the witnesses.
A power of attorney is necessary when bank accounts, properties, and brokerage accounts have two or more names, and when the principal is incapacitated or is unable to act due to valid reasons. There are five primary forms of power of attorney, and you can choose any depending on your current needs. Lastly, feel free to refer to the samples of the power of attorney authorization letter provided in this article whenever you need to create one.