It may not matter. A settlement/lawsuit award like this would generally be treated the same way as a trust fund which the student/beneficiary doesn’t have access to until a future date: it gets reported on FAFSA as a student asset. You can’t pretend it doesn’t exist based only on the fact that you won’t have access to the money for a few more months. Note that there are some exceptions to these policies, so it’s impossible to provide an accurate answer for your specific situation without more details.
A slight clarification: 529 assets do not have to be used for educational purposes. 529 money can be used for anything the account owner wants to use it for. The catch is that any earnings portion of a 529 distribution that is spent on non-education qualified expenses is subject to income tax and possibly a 10% penalty as well. In the situation here, if OP put the $20,000 into a 529 account on Monday and then took it all out on the next Friday with no earnings for the purpose of buying a boat, there would be no tax and no penalty. If there was $20 of earnings over that brief period, this small amount would be subject to income tax and probably the 10% penalty as well (assuming no penalty exceptions apply).