Wow really?
My girls are paddock kids so I pass down everything, stained stuff becomes motorbike & paddock clothes and anything not ruined is passed on for the fact it survived
My girls are so close on age though that I do an empty of 1 draw and it goes straight to DD2, they have soooo many clothes given to them sometimes DD1 doesn't wear things.!
Same here with my boys ZF.....what everything can get worn especially being on a farm, they have there farm clothes.

But in answer to the question yes I do hand down undies, my 2 eldest boys are the same size so it became too hard trying to remember whose undies were whose (and they didn't care) so now that just all go in the draw together. I have kept the decent ones and handed them down to there younger brother. That being said when he started toilet training he did get some brand new jocks of his own so I too just through out anyones that ended up with No 2's in them in the bin. I wouldn't accept underwear from someone else though I use these as I know where they have been and how they have been washed.