Can dad use part of his son’s settlement to relocate his family from a bad to as decent neighborhood?

If your grandson is a minor, the insurance company will ask for court approval of the settlement [so when he turns 18 he does not sue their insured alleging the amount was inadequate and they took advantage of him] and it will be up to the court to decide what funds can be released from the trust which will be set up. It may be difficult to convince the court to allow the use of any funds for the benefit of the family and not your grandson himself.