I also found this example (Add phonetic guides to text) but I wonder if it is current to word 2013, given that it
was written for word 2003. For example, it refers to the format menu, which no longer exists.
Surely there is some current method...
I know this is an old post, but since it hasn't been solved...
There is a font called "Balaram", which is designed for writing in IAST. I just did a google search for the font and it is available for download for free.
If you want a free online font, this is by far the easiest font to use, but you have to copy and paste the results to your destination:
http://spokensanskrit.de/training/transliteration.php
The Devanagari script on the spokensanskrit.de site can be a little temperamental when copied to an offline location such as Word, but it works on Google Docs.