In Fate, treat the weapon as an Extra and note the following text on a character sheet:
Finn's Golden Sword of Battle
When used in melee, it can inflict damage to a monster's stress track as if it were a real sword.
If a character does a bit of research on the topic of lethal toy swords (I suggest a Careful approach) and scores a Good (+3) result, then he or she will learn the following from a paranormal research discussion board:
"The precedent of toy swords being able to harm malevolent creatures was set in the summer of 1979 by Joe Gibbs of Venice Beach, CA. At the time, eight-year-old Joe and other children in the area were plagued by a disturbing number of attacks and abductions targeting children. Joe and his friends armed themselves with home-made wooden swords. Joe spray painted his sword silver and tied a black bandanna around the hilt.
Armed with their humble weapons, Joe and his friends were able to defend themselves from further predation. Joe's sword is currently in the possession of members of the "Thursday Night Fight Club", a paranormal investigating team based in Los Angeles.
As to why the toy swords can harm monsters, it is speculated that the monsters made themselves vulnerable to attack by violating a centuries old compact regarding quotas relating to predation upon children. Because the monsters violated the "rules of warfare" so to speak, the concession was that children (and perhaps those adults who retain a child-like belief in the supernatural) could now better protect themselves."