How do you navigate the inevitable awkward conversations when family ask where that very special whatnot is? (You gave it away/got rid of it)
To begin, we are obviously quite vocal and transparent about our living situation (understatement, ha!), which includes our general lack of space and efforts to keep our possessions to a minimum. Being so open about our home means most of our friends and family are sensitive to this and usually give us consumables (food, wine etc), gift cards, clothes or smaller/travel versions of toys. But there are the inevitable thoughtful and generous gifts that we just don't have room for. With those gifts we try to get in one or two wears or play times (with a Photo for thank you's!) and then send it to a good home. We go through our list of friends with kids the same age or younger than Theo and offer it to them first and then if there is no interest, we donate. I'm not saying this process is easy. I really enjoy editing our own items but feel awful about editing gifts. As much as possible we just try to prevent the receipt of gifts when we can, for example saying no gifts for the kids' birthdays.
With family members that you can be more open with, one recommendation is that if they want to buy the big plastic toys you don't have room for, they can keep it at their house for your kid to visit. Grandma does this a lot with Theo and as she has a bigger house and backyard, she will store larger items at her home for him to play with when he visits.