In our family, we have a special way of transitioning the kids from receiving from Santa, to becoming a Santa. This way, the Santa construct is not a lie that gets discovered, but an unfolding series of good deeds and Christmas spirit.
When they are 6 or 7, whenever you see that dawning suspicion that Santa may not be a material being, that means the child is ready.
I take them out "for hot chocolate" at the local cafe. We get a booth, order our drinks, and the following pronouncement is made:
“You sure have grown an awful lot this year. Not only are you taller, but I can see that your heart has grown, too. [ Point out 2-3 examples of empathetic behavior, consideration of people's feelings, good deeds etc, the kid has done in the past year]. In fact, your heart has grown so much that I think you are ready to become a Santa Claus.
You probably have noticed that most of the Santas you see are people dressed up like him. Some of your friends might have even told you that there is no Santa. A lot of children think that, because they aren't ready to BE a Santa yet, but YOU ARE.
Tell me the best things about Santa. What does Santa get for all of his trouble? (lead the child from "cookies" to the good feeling of having done something for someone else). Well, now YOU are ready to do your first job as a Santa!" (in a whisper, leaning in.. make sure you maintain the proper conspiratorial tone.)
Then have the child choose someone they know, usually a neighbor or school mate.
The child's mission is to secretly, deviously, find out something that the person needs, and then provide it, wrap it, deliver it--and never reveal to the target where it came from. Being a Santa isn't about getting credit, you see. It's unselfish giving.
My oldest chose the "witch lady" on the corner. She really was horrible--had a fence around the house and would never let the kids go in and get a stray ball or Frisbee. She'd yell at them to play quieter, etc--a real pill. He noticed when we drove to school that she came out every morning to get her paper in bare feet, so he decided she needed slippers. So then he had to go spy and decide how big her feet were.
He hid in the bushes one Saturday, and decided she was a medium. We went to Kmart and bought warm slippers. He wrapped them up, and tagged it "merry Christmas from Santa." After dinner one evening, he slipped down to her house, and slid the package under her driveway gate.
The next morning, we watched her waddle out to get the paper, pick up the present, and go inside. My son was all excited, and couldn't wait to see what would happen next. The next morning, as we drove off, there she was, out getting her paper--wearing the slippers. He was ecstatic. I had to remind him that NO ONE could ever know what he did, or he wouldn't be a Santa.
Over the years, he chose a good number of targets, always coming up with a unique present just for them. One year, he polished up his bike, put a new seat on it, and gave it to one of our friend's daughters. These people were and are very poor. We did ask the dad if it was ok. The look on her face, when she saw the bike on the patio with a big bow on it, was almost as good as the look on my son's face.
When it came time for Son #2 to join the ranks, my oldest came along, and helped with the induction speech. They are both excellent gifters, by the way, and never felt that they had been lied to--because they were let in on the Secret of Being a Santa.