Modric's certainty is still unclear but it is likely that he will leave the Madrid squad even though his fate will be where we still cannot predict it because there is no situation that can really be ascertained that Modric's next destination after he leaves Madrid.
However, it will not be a big problem because Ancelotti's rotation in the last 2 seasons has functioned to keep the squad good despite Modric's departure.
In the end, it will have an impact because Modric is one of the cogs of Madrid's attack but on the other hand, they can be fine and I am sure of that because Madrid's young players are currently very good in terms of play and they can be relied on to support the midfield to be even better. Jude's position could be flexible but I think the trio of Camavinga, Tchouameni and Valverde is still a very good option.
His contract with Real Madrid will expire in June, 2024. I heard a rumor, Ancelotti offers him to be apart of Real Madrid coaching staff. If Modric decides to retire in the end of this season, he can accept the offer made by Ancelotti. But if Modric still wants to continue his career as a professional player. Modric must leave Real Madrid since there is no contract extension. There are a rumor of the interest from Saudi teams, they will give Modric a huge salary of Modric wants to play in SPL. Now, it depends on what the decision wants to make by Modric.
I don't think the departure of Modric won't give a serious impact. There are already enough top midfielders to replace Modric's role. Camavinga, Tchouameni, Bellingham, and Valverde are some players who have the same position as Modric. And we must realize that Modric is getting rarely to play full time recently. It indicates that Real Madrid no longer too depends on Modric anymore.
His departure will not have a serious impact on Real Madrid, but still his loss will be felt considering he is a player who has had a big impact on Real Madrid's game, so even though it is small, I think the influence will still be there.
Regarding his future, it is possible that the rumors were true when Ancelotti made Modric an offer to be on the coaching staff because I think he also has the talent to become a coach. With his advantage in the midfield, usually players like that have a good chance of becoming a coach. And Modric also has good abilities in reading the game, that will be a big asset for him to become a coach.
But I haven't heard anything about whether he will stay, retire, or go to another team. What is clear is that before his contract actually expires he will be seen with Real Madrid and I think it is possible that he will be extended again. But let's see what Real Madrid will do with this player.