I wonder if people who don't pass down underwear also don't re-use cloth diapers with subsequent babies. Because that seems grosser to me (and I did re-use them, just saying), since diapers are actually pooped and peed in, while underwear, generally, is not.
If I thought my washing routine was not sanitary enough for other people's underwear, it wouldn't be sanitary enough for our family's underwear, yk?
Once we stopped washing diapers, I continued to wash handkerchiefs, kitchen cloths, family cloth, underwear, dishtowels, and socks with a more "sanitizing" routine than the rest of the laundry.
I see no problem with used underwear at all. My girls love getting hand-me-down underwear because sometimes it has better pictures than the underwear I am willing to buy! (Disney stuff...) We pass our outgrown undies down to cousins.