You absolutely need local legal and tax counsel. Proceeding without either could prove disastrous.
Regardless:
1. Yes, if the account is in the name of the trust, then in order for there to be a distribution of either income or corpus, the funds would have to be transferred out of the account.
2. Yes, you can make a 663(b) election in which case you would have 65 days from the end of the trust's tax year to make a distribution.
3. If the distribution is of income or gain, it will (should) appear on the K-1.
4. Adding funds back to the trust account (of an irrevocable trust) is generally improper in the absence of a mistake.
5. There may be a plethora of other factors, both federal and local, which is why legal and tax counsel is highly recommended.
