Quantifying the effects of taphonomic processes on species abundances in time-averaged death assemblages (DAs) is pivotal for paleoecological inference. However, fidelity estimates based on conventional “live-dead” comparisons are fundamentally ambiguous: (1) data on living assemblages (LAs) are based on a very short period of sampling and thus do not account for natural variability in the LA, (2) LAs are sampled at the same time as the DA and thus do not necessarily reflect past LAs that contributed to the DAs, (3) compositions of LAs and DAs can be autocorrelated owing to shared cohorts, and (4) fidelity estimates are cross-scale estimates because DAs are time-averaged and LAs are not. Some portion of the raw (total) live-dead (LD) variation in species composition thus arises from incomplete sampling of LAs and from natural temporal variation in the local community (together = premortem component of LD variation), as contrasted with new variation created by interspecific variation in population turnover and preservation rates and by the time-averaging of skeletal input (together = postmortem component of LD variation). To tackle these problems, we introduce a modified test for homogeneity of multivariate dispersions (HMD) in order to (1) account for temporal autocorrelation in composition between LAs and DAs and (2) decompose total LD compositional variation into premortem and postmortem components, and (3) we use simulations to evaluate the contribution of within-habitat time averaging on the postmortem component. Applying this approach to 31 shallow marine molluscan datasets, each consisting of spatial replicates of LAs and DAs in a single habitat, we find that total LD variation is driven largely by premortem variation among LAs, but the increase in total LD variation owing to postmortem processes is significantly positive in 25-65% of datasets (depending on the metric) with HMD assuming autocorrelation. Had we ignored the effects of autocorrelation, the effects of postmortem processes would be negligible, inflating our overall inference about the quality of the fossil record. Simulations show that the increase in temporal scale owing to within-habitat time-averaging does not in itself increase total LD variation to a large degree – it increases postmortem variation mainly via increasing species richness, and typically rather decreases total LD variation by reducing dispersion among DAs. The compositions of DAs from habitats characterized by high variability among LAs exhibit less modification by postmortem processes than DAs from temporally stable habitats, identifying a previously unrecognized first-order factor affecting estimates of postmortem variation.