Chelsea must "cherish" John Terry, with Guus Hiddink in favour of integrating him into the club's "culture".
Terry's Chelsea contract is set to expire at the end of the season, with rumours linking him to a move away rife.
A red card in the 3-2 defeat against Sunderland last weekend ruled the centre-back out of the final two Premier League games, leading to suggestions he may have played his last match for the club.
However, Chelsea announced on Friday Terry had been offered a one-year contract extension, though the 35-year-old has since revealed it is for "a different role".
Outgoing manager Guus Hiddink believes the captain deserves the utmost respect and still has plenty to offer the club.
"He is already 21 years in this club. I saw an image of him recently coming in as a youngster," said Hiddink.
"It's huge, 21 years, that's why they become legends. You must cherish those legends for the future as well.
"It's not about age. He is mentally strong, and also good for the younger people. Let's say the academy boys, to inspire them."
The Dutchman hopes confirmation that Chelsea are in talks with Terry will ease the concerns of supporters - some of whom held up banners calling on the club to offer him a new contract at recent games.
Hiddink believes players that only represent one club should be encouraged to stick around beyond their careers on the pitch to help cultivate a loyal environment.
"I think once the two are talking to each other regarding the near future is a good signal for everyone, in the stands as well," he said.
"Clubs must be very aware of using the strengths of those guys. When they have a beautiful career and are attached to one club - Manchester United have had some very good players, legends - they should switch off for a year, or half a year, and then come back.
"They must switch off from their [playing] career before going down another path. When a club has an opportunity to integrate them in their culture, I'm always in favour of that.
"The condition is the players, when they know they have said farewell to their playing days, they must make a transition in their lives too.
"But most of the legends are 'simple' people. They know the game, they have felt the success and failure of the game, and if they can transfer that to the young boys, it's perfect."