We've flown a flag outside our house for years now, and recently I noticed it was getting tattered and worn. I replaced it last week with a bright, fresh one. So then all we had to do was get rid of the old flag.
Many people don't know this, but the preferred way to dispose of an American flag is to burn it (respectfully, of course) and then bury the ashes. MJ and I want our kids to learn basic tenets of patriotism like this, so we decided to get them involved. Not surprisingly, they were very excited at the idea. "Let's burn the flag!" bellowed Little Man at top volume as he ran around our backyard. "When are we going to burn the flag?" (Which prompted an explanatory call from me to our neighbors, after MJ and I stopped laughing.)
There's no official ceremony to follow, but we placed it in our fire pit, set fire to it, and had the kids recite the pledge of allegiance while it burned. Then we gathered the ashes, dug a hole, and buried them.