I'm not Joe or his team, but maybe I can provide some insight.
Federal grants and loans and some state financial aid is based on information provided on the FAFSA. Pretty much every school will require the FAFSA from a student who applies for financial aid. Many schools that dispense institutional financial aid (primarily the more selective schools) also require the CSS/Profile form in addition to the FAFSA. Profile takes a more in-depth look at student and family finances. Schools that dispense their own (institutional) aid can choose to base those aid awards on whatever criteria they like, so individual financial circumstances will be treated differently at these schools.
That being said, I will assume that the aid that the child is receiving from the State belongs to the child, and not to your client. Your client is likely acting as a custodian of this aid with a fiduciary duty to use the money in the best interests of the child. If the money is used to fund a 529 account, it will be a custodial account. The child will be both the owner of the account and the account beneficiary, with an adult custodian appointed to manage the account until the child reaches the age of majority, based on state law. For FAFSA purposes, custodial 529 accounts are treated as parental assets, which is good, as parental assets are assessed at a max of 5.4% under the FAFSA formula, while student assets can be assessed at up to 20%. Schools that use the Profile form may assess custodial 529 accounts as either parent or student assets depending on school policy when distributing institutional aid, so without knowing a specific school it's hard to make any predictions.
One thing to consider is whether or not the child will be treated as an independent student at the time he/she first applies for financial aid. If there are no natural or adoptive parents in the picture, this may very well be the case and a custodial 529 account will probably be considered by FAFSA as a student asset. Look at the FAFSA website to see under what circumstances a student is considered to be independent, if you are not already familiar.
I would ask your client, what are her other options for the state aid? Knowing the answer to that question will allow you to make a comparison between options as to how the money is treated for financial aid purposes.