Edit: Rephrased the question and title which makes the context unnecessary but left it in order to show where the question is coming from.
Context: A while ago, our group suffered an almost-party-wipe, where my character, a chaotic good cleric, and a lawful good paladin were the only survivors. At that point we inherited all the group's magic items. We divided them between us two, making both of us quite powerful, and then went out to recruit the other players' new characters. Our DM provides newly created characters with "only" with 1 magic item. This acts as the 'punishment' for having died. All the players agree this makes the game more fun, and we are fine with how the DM handles magic items in his campaign.
My character and the paladin have since been acting as party leaders, recruiting new characters and making quest-related decisions. Under our leadership, we have been exercising a loot division policy where stuff goes to whoever the majority deemed would make the best use of it.
Lately a newly joined character hast insisted this policy is not fair/equitable. And it's true, it doesn't aim to bolster the least-equipped character. It just aims to hand out NEW loot to whoever can make the most of it.
Although I would normally resolve these issues in-game, this player has taken things pretty personal. He's gotten quite upset that his character is behind items-wise. It is true, but that's mostly due to the death of his previous character -which by the way the most geared then-.
So I'm interested in finding out what widely used loot policies or systems for distributing loot between party members.