The last legacy I played I was a little sad when my founder died, but everyone after had to go to make space for the next generation. Currently, I have found storyline appropriate ways for my favorites not to die. For example, of course my favorite spellcaster is going to figure out the immortality potion and share it with his bestie, so they won't die. I let mermaids be immortal as long as they're in Sulani; once they leave the island, I let them age. I'm only just getting into the second and third generation in a rotational save, so I haven't had to let go of too many sims yet. I found it was much easier to let go of them once I had played out all of my ideas for their story and moved on to their kids.
Plus tons of screenshots. Once I figured out pose player, I went back in to my tray files, popped my first generation into a photo/testing save, and took a few poses group shots of them to put around their kids' houses to keep their memory alive in game. I've seen some people make a museum for their legacy/NSB families, and I think I'm going to do that for a lot of my sims' achievements in this save.