My first SW death (xenia)
 

I've just transfered the contents of my ~5 month established 40 breeder into a new-to-me custom 65 gallon. So far I've misplaced a monti cap (anyone got a frag of a red one I could buy?) and some xenia I've got on a rock has started to die. I'm wondering what the procedure is for a dead/dying softie. Do I cut the bulk of it off near the rock and take it out of the tank to try and preserve water quality or do I leave it in the tank and let it decay naturally?

If it looks like it is melting, take it out and chuck it

When I first got my home it looked like it was melting for the first day then it slowly started to "perk" up when I stuck it directly in front of the powerhead, now I have torn chunks out and sold half of it only a couple months later. I would keep a close eye on it, if tissue starts to come away, I would remove it from your tank.

I have a zenia that melted down really badly after a move so I cut away most of it and now it is growing back nicely. If you cut it out leave a little on the rock and if tank conditions become more favourable it may well grow back in.