These ARE fungus/mushrooms that grows on dead wood -- so by the time they appear (fruit) on the surface like this, the particular portion of trunk/branch is dead and colonized by the fungal mycelia. I would think there are no living branches above this point? It's best to cut this section off, sterilizing the cutting tool with alcohol or bleach water and making/repeating with a new clean cut until the cut surface is completely clear of deadwood and you are down to living tissue.
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