A Letter of Authority is a formal written document through which one person (the grantor or principal) authorizes another person (the agent or authorized representative) to act on their behalf in specific, limited matters with third parties such as banks, insurance companies, government agencies, or utility providers. Unlike a Power of Attorney, which is governed by the Uniform Power of Attorney Act and state statutes and grants broad legal authority, a Letter of Authority is a more focused instrument that relies on common law agency principles as articulated in the Restatement (Third) of Agency.

Under the Restatement (Third) of Agency, an agency relationship is created when one person (the principal) manifests assent to another person (the agent) that the agent shall act on the principal's behalf and subject to the principal's control, and the agent consents to so act. A Letter of Authority serves as the principal's written manifestation of this assent, defining the specific scope and limitations of the agent's authority.

The letter does not constitute a Power of Attorney under the Uniform Power of Attorney Act or any state power of attorney statute. It does not authorize the agent to execute deeds, enter into contracts, transfer real property, or make healthcare decisions on the principal's behalf. If access to protected health information is needed, a separate HIPAA authorization complying with 45 CFR Part 164 must be obtained. The limited nature of the Letter of Authority makes it appropriate for routine administrative matters where the full formality of a Power of Attorney is unnecessary.

Third parties who receive a Letter of Authority are entitled to rely on the agent's apparent authority until they receive notice of revocation. Under the doctrine of apparent authority, as recognized in all U.S. jurisdictions, a third party who reasonably believes the agent has authority to act and who acts in good faith in reliance on that belief may hold the principal bound by the agent's actions within the scope of the apparent authority.

A Letter of Authority is commonly used when an individual needs someone else to handle specific administrative matters on their behalf. Common scenarios include authorizing a family member to make inquiries about a bank account while the account holder is traveling or hospitalized, permitting an accountant to obtain tax records from the IRS or state tax authority, enabling an attorney to communicate with an insurance company regarding a claim, or allowing an employee to collect documents from a government agency.

Business owners frequently use Letters of Authority to authorize employees, accountants, or attorneys to interact with government agencies on the company's behalf for matters such as obtaining permits, filing documents with the Secretary of State, or resolving tax issues. Elderly individuals may use Letters of Authority to enable trusted family members to manage utility accounts, communicate with Social Security or Medicare, or handle correspondence with financial institutions.

Letters of Authority are also used in real estate transactions where a property owner authorizes a management company to interact with tenants, vendors, or local government on their behalf. In insurance matters, a policyholder may authorize a public adjuster or attorney to communicate with the insurance company regarding a claim. Estate executors and administrators may use Letters of Authority to interact with financial institutions and government agencies on behalf of a decedent's estate.

The letter is particularly useful where the full formality and cost of a notarized Power of Attorney is unnecessary or disproportionate to the task at hand. However, it is important to understand that many financial institutions have their own proprietary authorization forms and may require the principal to complete their specific form rather than accepting a general Letter of Authority.

The grantor's identification section must include the full legal name, address, phone number, and email of the person granting the authority. This information enables the third party to verify the grantor's identity and contact them if questions arise. The agent's identification section must include the full name, address, and relationship to the grantor. Specifying the relationship (e.g., attorney, accountant, family member) helps the third party assess the reasonableness of the authorization.

The scope of authority is the most critical section and must describe with precision exactly what actions the agent is authorized to perform. Under the Restatement (Third) of Agency Section 2.01, an agent has authority to take action only within the scope expressly or impliedly granted by the principal. Vague or overly broad language may cause third parties to refuse to honor the letter or, conversely, may expose the principal to unintended liability. The scope should also specify any explicit limitations or exclusions.

The duration section specifies whether the authority is limited to a specific date, continues until a task is completed, or remains in effect until revoked in writing. The revocation clause should identify how revocation will be communicated and confirm that the principal retains the right to revoke at any time. The identity verification requirement specifies what identification the agent must present when acting under the letter, typically a government-issued photo ID such as a passport or driver's license.

The limitation clause should explicitly state that the letter does not constitute a Power of Attorney and does not authorize the agent to execute deeds, transfer property, or make healthcare decisions. If HIPAA-protected information is involved, this should be separately addressed. The governing law clause should identify the applicable state, and the letter should include the grantor's signature, printed name, and date to establish authenticity.