Toasting

Who Toasts and When

Traditionally, the host or hostess offers the first toast, the more informal the occasion, however, the less this "rule" applies. Around a dinner table with friends, a guest can propose the first toast (and often does), usually as a way of thanking the host for bringing everyone together.
The only real guideline is to make sure that all the glasses are filled before toasting. The glasses don't have to hold champagne or wine or any other alcoholic beverage; it's perfectly fine for nondrinkers to toast with water, juice, or a soft drink. Even an empty glass is better than nothing.
The "host toasts first" rule does still apply at receptions and other large functions (though the best man usually leads the toasting at a wedding reception).

Getting the Crowd's Attention

The host must attract the crowd's attention before making his toast, which he does by standing and raising his glass-not by banging on a glass with a utensil. No matter how large and noisy the crowd, repeating "May I have your attention" as often as necessary is the more courteous option.

Sit or Stand

When it comes to sitting or standing, do what comes naturally. If toasts are made over pre-dinner drinks in the living room, the toaster may want to stand. At the dinner table, the toaster may remain seated if the group is fairly small. A table of a dozen or more usually requires the toaster to stand so that people will be able to hear.
Although the host often stands as he delivers his toast, everyone else-including the person or persons being toasted-remains seated. The exception is when the toaster asks everyone assembled to "rise and drink to the happy couple" or "stand and raise your glasses to our esteemed leader." The guests respond by taking a sip of their drinks, not by draining the glass; the idea is to save enough of the beverage for any toasts that follow. On ceremonial occasions, a toastmaster or the chairman of the committee often takes charge, sandwiching the necessary toasts between the end of the meal and before any speeches. Toasters are usually expected to stand on such formal occasions.

When to Toast

If a toast is to be offered at a meal, the first usually comes at the very beginning. Traditionally, the first toast is offered by the host as a welcome to guests. Toasts offered by others start during the dessert course.
Toasting isn't confined to a meal or special event. Spontaneous toasts are in order whenever they seem appropriate, as when someone raises his glass and offers good wishes or congratulations to his companions.

Replying to a Toast

When toasted, the "toastee" does not stand, nor does she drink to herself. All the recipient need do is sit and smile appreciatively. Once the toast is finished, she simply acknowledges the toast with a "thank you." She may then stand and raise her own glass to propose a toast to the host or anyone else she wants to honor. The same procedure is followed by a group of people who have just been toasted.

Prepared Toasts

Make sure to keep your toast short and on point (don't try to steal the show). If the toast the primary toast of the evening, a short speech should be prepared. You can use notes if you like when giving your toast.
Including a few personal remarks-a reminiscence, praise, or a relevant story or joke-is all to the good, but they should be in keeping with the occasion. Toasts at a wedding should tend toward the sentimental, those in honor of a retiring employee toward nostalgia, and so forth. And a touch of humor is rarely out of place.

Spur of the Moment Toasts

Joining in a group toast is blessedly easy, with glasses raised and shouts of "Cheers!" "To your health!" or "To Stan!" ringing out. Similarly, a spontaneous toast is relatively effortless in that it can be both brief and generic: "To Stan-God bless him!"
Should you draw a blank when you're suddenly asked to offer a toast, just remind yourself that a few sincere and complimentary words are all you need: "To Stan, a terrific guy and a friend to us all!" It's easier still when you can tie the toast to the occasion (what a good toaster should do in any event), whether you're at a dinner party or barbecue, an office party or a gathering of your high school classmates.

source:etiquettescholar.com