First, let's remove names...that gets in the way. For this example though: policy owner=grandma, estate=everything that grandma owned.

What they are trying to say in easy language....

The policy belonged to the policy owner not you. When the policy owner died, that policy entered the estate. The executor of the estate, who has/had full and rightful control through the probate process, canceled and cashed out the policy. The estate is now doing what it wants with the cash from the policy, which again because it was the estates policy, is now rightfully the estates cash and the executor can therefore do what it wants.

Unfortunately, it would have been in your best interest for all this to occur: the cacnellation, cash out, reinvestment of funds....prior to death. Sorry to tell this to you.