A good indicator of decay is the presence of fungal fruiting structures on the trunk, limbs, or roots.  Fungal fruiting structures come in a variety of shapes such as bracket, hoof, shelf (collectively called conks) and mushrooms (toadstools).  Textures can range from spongy, stringy, crumbly, flaky, woody, leathery, corky to fleshy.  Color may be yellow, orange, brown, white or black.  Sunken or raised areas that are wet or dry on trunks or limbs can also be indicators of decay.  Open wounds at the base of a tree or spots where limbs have failed or have been pruned, especially improperly pruned, often signal extensive wood decay.

Identifying trees with wood decay can also be difficult at times.  Decay that occurs cylindrically in the center of the trunk may be hidden from view by a ring of healthy wood and bark.  There may be no external evidence of advanced decay.  Trees that show a gradual decline in vitality with twigs or branches dying back may be extensively invaded with wood-rotting fungi.

Info courtesy Kramer Tree Services