What happens when you die
There are three known layers of existence.
First is our realm. Above our layer, there is the Afterrealm, where the dead are taken. The Afterrealm sits between our realm and The Void.
At night time the barriers between realms are at their weakest and it can be possible to break through. The denizens of the void realm wish to destroy our realm, as it is the antithesis of their existence.
The Afterrealm is, at daytime, a complete paradise. At night, however, the realm becomes a hellscape as the denizens of The Void invade the Afterrealm - their aim to take it over as a staging area to invade reality.
If someone in the Afterrealm is killed in battle, they become weakened and come back to 'life' at dawn. If this happens, they can no longer be resurrected in reality until they regain their strength (In game terms, they lose exp and levels and can be raised after gaining the experience back).
Because every soul helps to fend off The Void, it's usually considered bad form to take gear and equipment from fallen warriors. Even those that you hate and don't want to be resurrected. Necromantic animation (ie. raising zombies and skeletons) is also extremely hated, as it harms and corrupts the soul even in the afterlife.
The exception to gear being 'lost' when you're in the Afterrealm is if you do something exceptionally heroic with it. Everyone knows that Arthur wielded Excalibur, and therefore would have it in the Afterrealm even if it had been looted.