Which estate planning tool allows an attorney-in-fact to manage the principal's healthcare needs?

A durable power of attorney is specifically designed to grant an appointed individual, known as the attorney-in-fact, the authority to make decisions on behalf of the principal, especially concerning healthcare matters, when the principal is unable to do so. This legal document remains effective even if the principal becomes incapacitated, allowing seamless management of healthcare decisions, which can include anything from selecting healthcare providers to consenting to or refusing treatments.

In contrast, a living trust primarily focuses on the management and distribution of a person's assets upon their death or incapacity but does not directly address healthcare decisions. A testamentary trust is created through a will and only takes effect after the individual's death, making it irrelevant for healthcare management during a person’s life. A health care proxy is indeed another tool related to healthcare decisions, but it specifically designates someone to make those decisions only and does not have the broader powers associated with a durable power of attorney, which can cover other financial and legal matters as well. Thus, the durable power of attorney uniquely combines both healthcare and financial decision-making powers, making it the correct choice for managing a principal's healthcare needs.