The illness of Augustus in 23 BC brought the problem of succession to the forefront of political issues and the public. To ensure stability, he needed to designate an heir to his unique position in Roman society and government. This was to be achieved in small, undramatic, and incremental ways that did not stir senatorial fears of monarchy. If someone was to succeed his unofficial position of power, they were going to have to earn it through their own publicly proven merits.
Some Augustan historians argue that indications pointed toward his sister's son Marcellus, who had been quickly married to Augustus' daughter Julia the Elder. Other historians dispute this due to Augustus' will read aloud to the Senate while he was seriously ill in 23 BC, instead indicating a preference for Marcus Agrippa, who was Augustus' second in charge and arguably the only one of his associates who could have controlled the legions and held the Empire together.
After the death of Marcellus in 23 BC, Augustus married his daughter to Agrippa. This union produced five children, three sons and two daughters: Gaius Caesar, Lucius Caesar, Vipsania Julia, Agrippina the Elder, and Postumus Agrippa, so named because he was born after Marcus Agrippa died. Shortly after the Second Settlement, Agrippa was granted a five-year term of administering the eastern half of the Empire with the imperium of a proconsul and the same tribunicia potestas granted to Augustus (although not trumping Augustus' authority), his seat of governance stationed at Samos in the eastern Aegean. Although this granting of power would have shown Augustus' favor for Agrippa, it was also a measure to please members of his Caesarian party by allowing one of their members to share a considerable amount of power with him.
Augustus' intent to make Gaius and Lucius Caesar his heirs was apparent when he adopted them as his own children. He took the consulship in 5 and 2 BC so he could personally usher them into their political careers, and they were nominated for the consulships of AD 1 and 4. Augustus also showed favor to his stepsons, Livia's children from her first marriage, Nero Claudius Drusus Germanicus (henceforth referred to as Drusus) and Tiberius Claudius (henceforth Tiberius) granting them military commands and public office, though seeming to favor Drusus. After Agrippa died in 12 BC, Tiberius was ordered to divorce his own wife Vipsania and marry Agrippa's widow, Augustus' daughter Julia — as soon as a period of mourning for Agrippa had ended. While Drusus' marriage to Antonia was considered an unbreakable affair, Vipsania was "only" the daughter of the late Agrippa from his first marriage.
Tiberius shared in Augustus' tribune powers as of 6 BC, but shortly thereafter went into retirement, reportedly wanting no further role in politics while he exiled himself to Rhodes. Although no specific reason is known for his departure, it could have been a combination of reasons, including a failing marriage with Julia, as well as a sense of envy and exclusion over Augustus' apparent favouring of his young grandchildren-turned-sons, Gaius and Lucius, who joined the college of priests at an early age, were presented to spectators in a more favorable light, and were introduced to the army in Gaul.
After the early deaths of both Lucius and Gaius in AD 2 and 4 respectively, and the earlier death of his brother Drusus (9 BC), Tiberius was recalled to Rome in June AD 4, where he was adopted by Augustus on the condition that he, in turn, adopt his nephew Germanicus. This continued the tradition of presenting at least two generations of heirs. In that year, Tiberius was also granted the powers of a tribune and proconsul, emissaries from foreign kings had to pay their respects to him, and by 13 was awarded with his second triumph and equal level of imperium with that of Augustus.
The only other possible claimant as heir was Postumus Agrippa, who had been exiled by Augustus in AD 7, his banishment made permanent by senatorial decree, and Augustus officially disowned him. He certainly fell out of Augustus' favor as an heir; the historian Erich S. Gruen notes various contemporary sources that state Postumus Agrippa was a "vulgar young man, brutal and brutish, and of depraved character." Postumus Agrippa was murdered at his place of exile either shortly before or after the death of Augustus.
On 19 August AD 14, Augustus died while visiting the place of his birth father's death at Nola. Both Tacitus and Cassius Dio wrote that Livia brought about Augustus' death by poisoning fresh figs, though this allegation remains unproven. Tiberius, who was present alongside Livia at Augustus' deathbed, was named his heir. Augustus' famous last words were, "Have I played the part well? Then applaud as I exit"—referring to the play-acting and regal authority that he had put on as emperor. Publicly, though, his last words were, "Behold, I found Rome of clay, and leave her to you of marble." An enormous funerary procession of mourners traveled with Augustus' body from Nola to Rome, and on the day of his burial all public and private businesses closed for the day.
Tiberius and his son Drusus delivered the eulogy while standing atop two rostra. Coffin-bound, Augustus' body was cremated on a pyre close to his mausoleum. It was proclaimed that Augustus joined the company of the gods as a member of the Roman pantheon. In 410, during the Sack of Rome, the mausoleum was despoiled by the Goths and his ashes scattered.
The historian D.C.A. Shotter states that Augustus' policy of favoring the Julian family line over the Claudian might have afforded Tiberius sufficient cause to show open disdain for Augustus after the latter's death; instead, Tiberius was always quick to rebuke those who criticized Augustus. Shotter suggests that Augustus' deification, coupled with Tiberius' "extremely conservative" attitude towards religion, obliged Tiberius to suppress any open resentment he might have harbored.
Also, the historian R. Shaw-Smith points to letters of Augustus to Tiberius which display affection towards Tiberius and high regard for his military merits. Shotter states that Tiberius focused his anger and criticism on Gaius Asinius Gallus (for marrying Vipsania after Augustus forced Tiberius to divorce her) as well as the two young Caesars Gaius and Lucius, instead of Augustus, the real architect of his divorce and imperial demotion.