Difference between Power of Attorney and Letter of Authority

Key Difference: Both, Power of Attorney and Letter of Authority are used to give someone else power or authority to do something on your behalf. The main difference between the two is the fact that while the Letter of Authority gives someone authority to act on behalf of someone for a specific manner, the Power of Attorney gives someone total power to act, speak or make decisions on their behalf.

Both Power of Attorney and Letter of Authority are legal documents that provide someone else with power or authority. Law and legal documents are confusing as is, and here further confusion is added due to the fact both Power of Attorney and Letter of Authority seem to serve similar purposes. What’s more you don’t want to accidently use the wrong one and not get your work done, or worse, have someone take advantage of you.

Both, Power of Attorney and Letter of Authority are used to give someone else power or authority to do something on your behalf. However, each of them is slightly different in regard to the powers they provide, and the manner in which they provide it.

Power of Attorney and Letter of Authority come into play when you have to give a third party permission to act on your behalf, especially for situations where you can’t on your own behalf, such as when you are not able to be there or when you want someone else to take care of it. This situation usually arises in terms of financial matters, legal issues, or for health directives.

A Power of Attorney, on the other hand, gives someone compete power to act on your behalf. Basically, the person with the power of attorney speaks for the person who signed it, sometime even if he doesn’t want them to.

So, the main difference between the two is the fact that while the Letter of Authority gives someone authority to act on behalf of someone for a specific manner, the Power of Attorney gives someone total power to act, speak or make decisions on their behalf.

The purpose of a letter of authority is to either divulge sensitive material or to delegate a specific task. Whereas a power of attorney gives someone else complete power to act and make decision on their behalf; here the power could be regarding a specific task, such as purchase of a property, a business deal, etc., or the power could be absolute, i.e. complete power to make all decisions on their behalf.

Think of it this way, a letter of authority gives someone authority to do something, whereas a power of attorney is for transferring your power to someone else. The reason for this is that the person with the power of attorney can make a decision on your behalf even if you don’t agree with the decision. However, since you have signed a power of attorney you don’t have a choice, their decision stands over yours. Hence, a power of attorney should only be given to people you absolutely trust.

Due to this, a power of attorney needs to be notarized, whereas a letter of authority does not need to be. Also, as a powerful legal document, the power of attorney tends to have more details and should be used only for specific situations that can’t be avoided. Whereas a letter of authority can be used for practically anything, such as collect documents on your behalf, collect money on your behalf, pay bills on your behalf, etc. Letter of Authority is generally used for less important tasks as you are only giving them authority to do something in your place. However, they won’t be able to make decisions on your behalf unlike as with a power of attorney.

Comparison between Power of Attorney and Letter of Authority:

 

Power of Attorney

Letter of Authority

Type

Legal document

Legal document

Function

Delegates power to another person or entity to act and make decisions on their behalf

Delegate sensitive legal, health or financial obligation to another person or entity

Purpose

To act as you and make decisions on your behalf.

To be present on your behalf and carry out a task.

Authority

Complete Authority – Can do everything on their behalf

Partial Authority – Can only do something on their behalf

Contents

Must specify full particulars of the concerned parties and provide precise, in-depth details for clarity and communication purposes.

Must specify full particulars of the concerned parties and provide precise, in-depth details for clarity and communication purposes.

Power

More Powerful

Less Powerful

Task used for

Should be used for more complicated or specialized tasks

Should be used for less complicated tasks

Details

More detailed

Less detailed

Directions

Sets out the directions in which the tasks should be complete

May or may not specify the directions in which the tasks should be completed

Notarized

Notarized Certificate

Simple letter. No notary requires.

Uses

Business Deal, Property Purchase, Make medical decisions on your behalf, etc.

Pick up government documents on your behalf, gain access to your private information or files, collect information on your behalf, pay bills or collect revenue on your behalf, etc.

Reference: Wikipedia, WikiHow, India Briefing, Business Standard
Image Courtesy: timreesfineart.com, maheshzirape.com

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