Like most families, the royal family exchanges gifts every year, but they do it on Christmas Eve instead of Christmas Day. While at Sandringham House in Norfolk, all of the grandchildren and great-grandchildren to the queen finish decorating the tree before opening their presents.
When it comes to the adults — think Prince William, Prince Harry, the queen, etc. — the gifts are actually gag gifts that aren't very pricey (similar to a White Elephant exchange). The kids, however, get more gifts that aren't prank presents. Plus, the children open gifts from their parents (and other side of the family) on Christmas once their mass and lunch feast are over.
Perhaps this year Prince George will get the police car he's been asking for!
