@mommdc , yes , you have it right. The money will count as an asset wherever it might be sitting on the day FAFSA is filed, whether it is in a 529 or regular account, with the exception being certain qualified accounts like 401k, IRA, HSA
I was suggesting putting some of it into a 529 if OP is in a state where a tax deduction for such contributions from state income tax is allowed. Also, a 529 is a nice thing to have to encourage students to put away some money for college. A student bank account gets hit up 20% on FAFSA. A studebt’s 529 account gets hit up 5.6%. With smart planning Many students can benefit from having zero assets on the day FAFSA is filed.
Also, if OP uses funds to pay down a primary home mortgage, that money would not show up as an asset on FAFSA since primary home equity is not included in assets. But that’s not always the case with CSS PROFILE schools