Are you allowing a new PC into an existing campaign with other non-1st-level PCs?
In the past, I have given the newcomer the DMG recommended character wealth for whatever level he's coming in at. After the PC is outfitted, compare his gear to the gear of pre-existing PCs. If it seems to me that there is a discrepancy, I will ask that the newcomer adjust his cost-range to something more complementary to what the others already have. Oftentimes--because I like to give out loot--this means that the newcomer will get extra gear. Once it meant that the newcomer had too much and was courteously asked to strip away an item or two of his choice.
For PbP games, I frequently stipulate that no one item can cost more than half the allotted gold. I normally don't do this for my tabletop games. I tend to game with close friends at our tabletop and feel more comfortable just telling the table, "Here's what you get to spend, spend it how you want." For PbP (and I don't think this is your case if your other thread is anything to go by), I like a more even-handed approach so I'll use both a point-buy for character generation and put a cap of how much gold the players can spend on one item.
In any case, I let the players pick their gear from whatever supplements the rest of the table is using. I try to stay out of gear selection, but I do like to see a person's finished character sheet for a quick look-over (at most this is something I spend perhaps a minute on) before the newcomer joins the game. I have never told anyone what gear their character has. If someone wanted me to pick their equipment, I would. To date, no one has asked.
When a newcomer joins the party, I don't worry about the "increased wealth the party has now." I figure the newcomer is just one more target to shoot at for the monsters, plus the party is now splitting XP by an extra share, plus future loot hauls will have to be divided by an extra person. In my mind, that makes up for the "increased wealth." Hope I correctly understood what you were asking there--I get the feeling maybe I missed the boat?
No way does the party absorb the dead PC's items, though. That goes back to the temple or to the family, or may be sucked into some DM void or some other plane of existance. If the dead PC had been carrying an item of importance to the campaign or an item that was considered shared, I make sure the party gets said item. Otherwise, though, when your character bites it his gear is not available for the pilfering. I have trouble maintaining balance as it is and don't need to have things get too far out of whack by letting the group get a hold of the dead PC's stuff.
