Hm... Well, the simplest way I can think of to model that is as a sword that's been enchanted to be easier to conceal. That way it's always usable as a sword, and each time it becomes plot important that you have it with you, you get to use the enchanted item power level as your deceit roll to have it on you - and if that's more than once per session, you can start spending mental stress as normal for enchanted items.
Alternatively, depending on your GM, it could be a simple -0 Item of Power; the comparison here is the Human Guise power, which shows that a single essentially cosmetic change doesn't cost refresh.
Or, you could spend an aspect on it; (again depending on your GM) that might be enough to justify its limited powers. And even if not, it'd still give you the option to spend a fate point on just declaring that you've got the sword with you.
This does, though, beg a larger question: How does one structure transforming items in general? Say you've got a shapeshifter who wants to have clothes that shift with them?