What happens to a 8.5 week old embryo that dies due to a miscarriage?

Praise be to Allah, the Lord of the World; and may His blessings and peace be upon our Prophet Muhammad and upon all his Family and Companions.

If an embryo is intentionally aborted, then this action is completely Haram unless it is proved that the embryo is dead or its existence in mother's womb constitutes danger for her life. Also, this last opinion must be based on the opinion of an expert trusty doctor.
For more details, consult our Fatawa: 83814 and 83221.
On the other hand, as for miscarriage, i.e. the act of accidentally giving birth too early for the baby, the mother is not to be blamed since Allah burdens not a person beyond his/her scope.
Such a miscarried fetus is not to be washed nor prayed for since it is less than four months old.
It is recorded in Fiqh al-Sunnah: 'A miscarried fetus is not to be washed nor prayed for; it should be just shrouded with a piece of cloth and to be buried. There is no difference among the majority of scholars on this issue' .
Imam al-Nawawi stated the same above-opinion in his book al-Majmu' from al-'Abdari.
Allah knows best.