Letter of attorney

3 key takeaways

• A letter of attorney authorizes an agent to make decisions and take actions on behalf of the principal in legal, financial, or personal matters.
• There are different types of powers of attorney, including general, special, durable, and medical, each with specific scopes and durations.
• The document must be legally executed, often requiring notarization, to be valid and enforceable.

What is a letter of attorney?

A letter of attorney, or power of attorney (POA), is a formal document that allows an individual (the principal) to designate another person (the agent or attorney-in-fact) to make decisions and perform actions on their behalf. This delegation can cover a wide range of activities, from managing financial affairs to making healthcare decisions, depending on the type and scope of the POA.

Example

If an elderly person becomes incapacitated and can no longer manage their financial affairs, they might grant a durable power of attorney to a trusted family member, allowing that person to handle their banking, investments, and bill payments.

Types of powers of attorney

General power of attorney

A general power of attorney grants the agent broad authority to act on behalf of the principal in a wide range of matters, including financial transactions, business operations, and legal decisions. This type of POA is typically used when the principal needs someone to manage their affairs comprehensively.

Special (limited) power of attorney

A special or limited power of attorney grants the agent authority to act in specific situations or for particular tasks. For example, a principal might give a special POA to an agent to handle the sale of a property while they are abroad.

Durable power of attorney

A durable power of attorney remains in effect even if the principal becomes incapacitated or unable to make decisions. This type of POA is often used for long-term planning, ensuring that the agent can continue to manage the principal’s affairs without interruption.

Medical power of attorney

A medical power of attorney, also known as a healthcare proxy, allows the agent to make healthcare decisions on behalf of the principal if they are unable to do so themselves. This includes decisions about medical treatments, surgeries, and end-of-life care.

Key elements of a letter of attorney

Identification of parties

The document must clearly identify the principal and the agent, including their full names and addresses.

Scope of authority

The letter of attorney must specify the scope of the agent’s authority, detailing the actions they are authorized to perform and any limitations on their power.

Duration of authority

The document should state the duration of the agent’s authority, including the start and end dates, and conditions under which the POA can be revoked or terminated.

Signatures and notarization

To be legally binding, a letter of attorney typically requires the signatures of the principal and, in some cases, the agent. Notarization or witnessing by a third party may also be required to validate the document.

Advantages and disadvantages of a letter of attorney

Advantages

• Convenience: Allows the principal to delegate responsibilities to a trusted agent, ensuring their affairs are managed in their absence or incapacity.
• Flexibility: Can be tailored to grant broad or specific powers, depending on the principal’s needs.
• Continuity: Durable POAs ensure that the principal’s affairs continue to be managed even if they become incapacitated.

Disadvantages

• Risk of misuse: The agent may abuse their authority, leading to potential financial or legal issues for the principal.
• Loss of control: The principal must trust the agent completely, as they will have significant control over the principal’s affairs.
• Legal complexities: Creating a POA involves legal formalities, and improper execution can render the document invalid.

Related topics

• Guardianship: Learn about the legal process of appointing a guardian to manage the affairs of an incapacitated person.
• Estate planning: Understand the broader context of planning for the management and disposition of an individual’s assets and responsibilities.
• Revocation of power of attorney: Explore the procedures and implications of revoking a previously granted power of attorney.

A letter of attorney is a powerful legal tool that facilitates the delegation of authority from a principal to an agent. Understanding its types, scope, and legal requirements ensures that it is used effectively and responsibly to manage the principal’s affairs.