The best thing is what feels right for you. I can tell you what we do.
The rat gets wrapped in a blanket from our "collection" (of blankets we use for the rats, that is). Often times, if they are sick, it's one we kept in with them; if we rushed them to the vet, it's one we wrapped them in; if it's a sudden death, it's one they seemed to enjoy or one that fits their personality.
We then place them in a plastic bag (zip lock) and, odd though it sounds, keep them in the freezer and do mass burials (if needed).
However, we are probably going to start cremating them through the vet. That said, I think we'll still use the same methods at home.
I wouldnt give my passed any animal to the vets because if you dont order cremations, they ussualy get picked up by a service that picks up deceased animals and as sick as it is, many times these animals are brought to rendering plants where they are rendered and put in dog foods....so i would not recomend that.
I believe that would be illegal, immoral and something that wouldn't go on for long if anyone caught wind of it. Nor would most (hopefully any) vets willingly allow it. Where did you hear this?