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Laying

Is it correct to say...he died with his hands laying in his lap?

Re: Laying

No.
'to lay' means 'to place SOMETHING gently in a horizontal position'.
A mother lays her baby in a cot. Someone lays the kitchen table for dinner.

'to lie' means 'to be at rest in a horizontal position'.
A mother lays a baby in a cot. The baby is now lying in the cot (NOT 'laying').
The boy lays his pencil on the desk. The pencil now lies on the desk.

So:
He died with his hands lying in his lap

WATCH YOUR CAPITALIZATION OF THE FIRST WORD IN A SENTENCE.