Rewiring part of a circuit, how to properly terminate old branches?
If you have enough space in your existing outlet boxes (including box fill calculations), you can cap the K&amp;T wires and simply tuck them out of the way. I'd also recommend electrical tape to ensure that nothing accidentally moves or gets exposed, especially since this is a permanent disconnect.

If there isn't enough space, you can use a surface-mount junction box over the existing outlet box, or, as I've recently done, a raceway outlet box. You can cap and tape the K&amp;T in the old, recessed outlet box and pull the new cables further forward into the surface mounted box. When you're all done, cleanup is as simple as removing the surface mounted box and tucking everything back into the recessed box.