AC Milan has already released Tijjani Reijnders to Manchester City, if they also release Rafael Leao then the hope of rising next season will be even slimmer. Although Allegri is a good coach, he will have difficulty helping AC Milan perform consistently. Keeping Rafael Leao is a wise decision, it is not easy to find a suitable replacement if you let him go.
However, everything can still change, especially if AC Milan gets a high offer for Rafael Leao. Allegri hopes to bring out the best potential of each of his players next season, with the presence of experienced players like Modric his goal will be easy to achieve. I think with the depth of the squad they have, at least AC Milan will be able to finish in the top four next season.
AC Milan needs more quality players for their squad. And I think currently AC Milan is trying to prepare for this. By joining Modric it will bring a bit of fresh air to AC Milan. Although that would only be a short term option. But it could still be the best option for the next season. And I still see that Allegri will rely on Rafael Leao for next season. And I hope AC Milan keeps Rafael Leao no matter what. But I feel confident that Allegri will really bring AC Milan to an even better level for the coming season even with the current squad. And at least being in the top 4 is very possible for AC Milan to get.
Modric is an old player, I do not expect any hope from Modric because in terms of quality he certainly will not be able to perform optimally anymore and it is not a suitable replacement after the AC Milan team sold Tijjani Reijnders and indeed from what they did in this transfer market does not show that AC Milan is really building a stronger team they tend to seek profit from just a few sales.
And I doubt they will be able to compete at the top for next season, there is even a possibility that AC Milan will not be able to perform better than last season.