Well I think it’s both kind/generous and very practical to pass diamonds down! I have a feeling your son will be thrilled.
As to your general questions, in my opinion a lot would depend on how many kids one has and how many comparable diamonds. The “first-come, first-served” version mentioned above, if the 3 choices vary much in beauty or value, sounds possibly a little problematic to me (is it fair to the baby of the family or the one who takes a long time to find their love?). Perhaps in that circumstance, I’d get the 3 kids together to draw straws to pick which one they want , and then give their selection to them when the appropriate time comes.
If giving to a son, I agree it is imperative to truly suss out that the new daughter-in-law really wants the hand-me-down diamond. It could be too big/too small/too something for her taste. Or she might feel extra pressure to take care of it a certain way, perhaps feeling it’s still sort of her MIL’s. I confess I’m glad I picked my own ring out (and back then, my MIL was annoying me a little, and I really think I wouldn’t have been thrilled to use hers, hee hee hee). Or as mentioned, a DIL might love a special ring from a 70 year happy marriage, feeling it will bring good luck, but what if she doesn’t think her in laws have a beautiful marriage…maybe she’ll worry it will bring her bad luck .
It seems easier to me to pass a diamond down to one’s own daughter than to a daughter-in-law. But if one only has sons, then obviously that makes sense! Or to keep it and make a nice necklace when a granddaughter turns 16 (although again, what if multiple granddaughters!!). I guess maybe the new son-in-law could feel like a cheapskate not buying a ring for his new fiancé, but whatever, he’d be pretty lucky to get off the hook (!!), and the diamond might have more meaning to a girl coming from her own family.
But the practical side of me realizes that kids today face such expensive housing down payments, etc, that it’s a terrible time for them to plunk down a lot of money on a ring! So if there are no issues of being fair to multiple siblings, and it’s clear that both members of the happy couple would be overjoyed to receive it, it seems like a great idea!
I also agree that the two obvious times to discuss would be before anyone is in the picture, or if that time has passed, I’d wait until they are clearly discussing marriage. Most parents seem to be in the loop well before a ring is purchased.
Anyway, good luck, this is a very generous offer as long as there are no strings attached and no pressure and no judgment whatever they decide to do. I would hope no one would be offended if the “kids” wanted a fresh start with a fresh piece of jewelry. But I bet it’s very difficult to say no, so it’s a delicate discussion. And they may just leap at it!!!