This has happened to the other player twice.

I = host (Xbox one X)

Other player = She (Xbox one S)

First time this happened. (in version 1.16.0.53) I joined in and started wandering off from where we had logged off. While I was about 3 4/4 maps away from her spawn. She logged in without anything but a starter map. She spawned at the same spot as she has last logged off.

However, We were able to recover all lost items by logging off with both accounts and then I logged back in and ran to the spawn of hers. She logged on and everything was there!

On the second time. I was running to her spawn while she had already started to join in our world. She got nothing on. Only map on her hand. We were not able to recover items this time.

My video settings:

Rendering distance
22 chunks

Particle rendering distance
99

World setting:

Simulation distance
8 Chunks