If we look at the current Milan squad, they are already very good, and with Modric joining the midfield, this is certainly a good thing for Milan. I also understand why Milan brought in older players; perhaps they needed someone with extensive experience to build a better foundation for Milan. Now, Milan is managed by a renowned coach, with star players with big names in the squad.
With a better squad, they struggled in the last season and this summer, they lost some star players. It is not their good actitivities on transfer market and not too good preparation for a new season. Modric is a good midfieder even he is super old now, he is still useful for AC Milan and can contribute well for the club. With low intesity in Serie A matches, Modric will possibly be able to play more minutes within a match for AC Milan and this way his contribution will be more than if he plays in another league like La Liga or Premier League.
Modric is a great asset for the club, in fact I wouldn't have let Modric leave Madrid , but Madrid's management want to keep their money and they respect that, so given these things the best thing is what happens, and now AC Milan have a great Midfielder who will surely bring good news to their team, there is no doubt about that, for me AC Milan will be in one of the best teams in Italy.
Real Madrid is a very big club and has many star players so Modric has to compete with many younger star players there. The failures of Real Madrid in the past season results in his departure from Real Madrid as if they win titles like La Liga and Champions League, he would have been signed another 1-year contract by the club. The departure already happened as did the transfer to AC Milan, now it is a very last chapter in his career begins with this club. He is able to write this chapter as a good one before his retirement too.