Here's my flowchart:
1. Tops and sweaters along with all accessories and handbags go to my sister, who always welcomes a care package. We can't share shoes, pants, skirts, dresses, or anything with long sleeves unless they can be easily worn scrunched up.
2. After separating out the sister-worthy items, I would usually consign things but am currently putting those items in the swap pile.
3. Donate. I don't donate anything that's damaged in any way, but I do donate anything I can't consign because a.) it's not the right season, b.) it's more than 2 fashion seasons old, or c.) I don't have ten items to consign at once (my consignment shop is picky).
4. Anything damaged gets donated to a textile recycling effort.