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Understanding The Difference Between The Power Of Attorney And Letter Of Authority

June 16, 2021 By Nagesh Belludi Leave a Comment

Baseball players and actors are not the only ones who look for agents. Life can sometimes be complicated so most people often appoint someone so that the wishes could be carried out, take care of our money, or make decisions on behalf of us about our health.

Both the power of attorney and the letter of authorization can be used to choose the agents, their limitations, and duties. However, know about the differences between the two essential documents.

Power of Attorney

It is a document, which is signed by a principal and usually notarized, which gives another person a grant on which he can decide on the principal’s behalf in regards to the terms of the document. The party gets the authority to act, which is commonly known as an “attorney” or “agent.” However, it is not essential that the agent needs to be a lawyer.

A power of attorney lets the agent undertake different activities on behalf of the principal, such as taking care of the money and handling their property. A power of attorney gets written on the letter of authorization, comprising the things that the principal wants the agent to do on his/her behalf.

A legal power of attorney will be valid even if the principal becomes incapacitated. It is because, otherwise, a principal who is unable to take the decisions can’t give powers to an agent. If the agent gets the right to take health care decisions on behalf of the principal when the principal is unable to decide on his own, it is known as a health care power of attorney.

Letter of Authorization

It is a document that gives another person, who we usually called an agent, the authority to act on another person’s behalf, called the principal. The document comprises the particular task which has been assigned to the agent from the principal.

The principal can be anyone like a corporation, individual, or any other entity. The task can be anything like borrowing money on behalf of the principal, picking dry cleaning clothes, or negotiating the contract for the principal.

Under the agency law in LOA, the action of the agents on behalf of the principal binds the principal. In simple words, the agent does the task of the principal and the principal will be responsible for what the agent does, along with the mistakes undertaken on behalf of the principal.

Warnings need to be considered

The principal will have to pay for any mistake of an agent so it is essential to choose wisely. After all, the principal will trust and give his entire life to an agent. In various cases, the agent is usually a relative or friend. If the agent is to be compensated for the work, it is crucial to spell or mention the financial details in the power of attorney or authorization letter.

Letter of authorization needs a rare notary, but signatures are essential to be there on power of attorney. Nursing homes and hospitals usually need that durable power of attorney to be notarized and witnessed.

Filed Under: Inspirational Quotations

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About: Nagesh Belludi [hire] is a St. Petersburg, Florida-based freethinker, investor, and leadership coach. He specializes in helping executives and companies ensure that the overall quality of their decision-making benefits isn’t compromised by a lack of a big-picture understanding.

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