Death and Wealth

In general I don't find it too problematic. The party keeps some stuff and sells the stuff they can't really use (at half price, so that drops out some of the wealth right there). Then I just lower the treasure for a little while to balance things out.

If there are a lot of deaths quickly I understand the problem. Then you might take more drastic steps to lower the parties wealth.
 

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IMC the equipment a character started with (if the starting level was higher than 1) is off-limits; it either gets buried with the character of returned to relatives/affiliations.
Equipment and money that was acquired later on as loot is redistributed/sold.

If this resulted in too much equipment for the rest of the party, I'd reduce the loot for the next couple of encounters until it was balanced again. Never had to, yet, though.
 

We had to deal with this in a Return to the Temple of Elemental Evil campaign I ran. We did the "loot the dead party member" routine at first, but once we had the third party member death we saw the problem with exploding overall party wealth.

From that point forward we've used a rule that stands to this day: If it belonged to the dead PC, it goes to his or her family/church/charity. All characters even have a Last Will and Testament. It's required.

The party DID get to keep what were considered "party items" that the dead character happened to be carrying/using. For example, the party finds a wand that only one character can even use, so he carries it, but the party has not had the chance to officially divvy up treasure equally. Such a wand would be kept by the party. However, the party would have to sell it; they couldn't "save" it for the replacement character. The replacement character always came in a level lower than average party level, and always came in at "standard" PC wealth for that level.

Later,

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