If you've played the older Dragon Warrior/Dragon Quest games on the NES, you probably remember that when a party member died, their sprite changed to a hollow outline representing their 'ghost'. This tutorial will show you how to do something similar in your own game.
Demo here:
You will first need to create duplicates of your character sprites so that you have one 'normal' and one 'dead':
I just used Paint.net for this part. Just open the sprite, and change the Layer opacity from 255 to whatever you think looks best (the samples above were about 100 or so I believe).
Once you have that you need a common event like this:
Be sure the trigger is set to Parallel Process, otherwise it won't work. The switch to trigger the event (StartOfGame in the example) needs to be turned on at the very beginning of the game.
You're done! The only flaw I can't seem to figure out is if you use an item or a spell to revive a dead character, their "dead" face in the menu won't change until you exit the menu and re-open it. I'm sure there may be a way to change that but if there is then I don't know about it.