Authentic U. S. currency does not smear. Your vintage counterfeit bill may be of interest to some collectors, but it is ultimately an illegal forgery, so that would have to be a very special collector.
Yes. It is still worth $20 if it is physically intact, without any rips or tears. It is worth the original value of twenty dollars, though that is worth less due to inflation than in 1985.
With that amount of smearing, I would be concerned that the bill is actually a counterfeit. However, if it is not, it is still worth the full $20 and you can trade it in at any bank.
Even though your @20 bill is 24 years old it is still worth only $20 even to a collector, there is no monetary value added unless it is a star note. I would suggest you spend it or keep it for another 20 years or so. Most currency becomes valuable after 50 years.
