In a D&D game I play, the party has had a 200% character turnover rate due to character death at low levels. Spawning at higher levels provides the incoming players with gear appropriate to their level.
The problem arises due to deaths during an adventure. The adventure (a module) has pre-written "parcels" in it. When the player dies and a "you look trustworthy, care to join us" moment happens, the new character has better gear than the old character, simply by virtue of the way the parcel system works.
Tym, a third level warden has played for a number of sessions. In these sessions the party has received a fair bit of gear, but due to the way parcels work [Every character should have roughly one piece of new gear every level], he has gear effective to a second level warden. During the latest session he dies, taking his second-level appropriate gear with him, but the party completes the session, advancing to 4th level, and getting the treasure reward at the end of the session for victory. A 4th level Ardent joins them with gear appropriate to 4th level to replace the warden.
At high levels (I've noticed this problem in mid-paragon in a different game) the opposite is true. Long-standing characters have approximately 200% the character wealth in gear they should from hanging on to old treasure parcels.
How should permanent character death impact the distribution of treasure in treasure parcels?