Will I be able to sell the condo and move to a less expensive home without losing what we have invested in the condo?

Cremation is paid for. Extra cost will be incurred for death certificates, mail outs, faxes, other required filings. $$ - at least 4 weeks for initial claims and about the same for any filing of year's support. If a creditor fails to file, it does not extinguish the debt. When there is still a mortgage it may have to be paid in full before a claim for year's support can be filed on the property. I know funeral, illness, administration and taxes come before a secured loan in our state. Secured loans are to be paid after these details are taken care of. I have asked an attorney for clarification regarding my ability to try for year's support if there is still money owned on a mortgage. The Probate attorney I consulted about sales of the condo while spouse is in snf talked to other attorneys because he had not encountered what the sales rules/options are for when there is a Medicaid lien. He does a lot of standard Probate filings. I will schedule a phone consult with another firm that is 2 hours away. It is also a Probate attorney, but his firm may have more experience. I haven't ruled out the local, but I will also discuss with another to see what I may learn. I will follow your suggestion to mention MERP as maybe that will give them a better idea of whether or not it's appropriate for my situation.

Houseplant - the mortgage co. is a secured creditor with a claim. Medicaid - via MERP - is an unsecured claim. MERP being unsecured is important as its deferent to secured. Other estate costs - like funeral, burial, probate / court costs, property management/costs, etc. - can also be claims. Just how this matters is very much interdependent on your states law for property & probate AND to me should have been clearly explained to you by your attorney.

Like for example if your state does probate by Level of Claim by Class, then just where claims are in line depends on class. Like for TX probate, it's done by level of claim by class. Funeral costs, probate costs, Executor costs (like for property), secured creditors (mortgage co) all are in Class 1 - 3 & priority for distribution of assets from the estate. MERP (unsecured) is Class 7 & paid only after 1- 6. Credit cards (also unsecured) come in a Class 8. If you have costs that could be entered as a claim, you need to do it and with documentation. You need to speak with your atty (or perhaps staff atty at probate court) as to just how to do this.

There are all sorts of nuances in estate recovery. It's not simple. Strategy for your situation is going to be different than for another. It may be that the probate attorney is somewhat clueless as to medicaid & its estate recovery program/system and the various exemptions, exclusions and cost-benefit requirements of MERP. Perhaps probate atty. more used to dealing with estates who actually have a$$et$ and make fees from doing distribution$ & $ettlements or drawing up new legal (like the will states trusts or an LLC created from assets). An estate with a substantial mortgage plus medicaid tally probably means NO real $$ within an estate... 
There is no reason why you cannot ask or email the atty and say "estate will have MERP (or whatever it is called in your state) & are you familiar & experienced" with it. And get it in writing from atty that they are. 

In our state MERP will consider, not guarantee, releasing the lien if by doing so, it will force you to accept public aid/benefits. If collecting on one debt (spouse's snf costs) results in your having to go on public aid, it's not worthwhile to collect the debt. The state may or may not pursue if it's $25K or less in his estate. A Probate attorney clarified we would loose almost everything if we sale our condo before snf spouse dies. I'm sure there are equally dire laws regarding how a property is handled after his death too.
We don't have elder law attorneys in our community. The Probate attorney will file because of the debt owed the state.
Hopefully an attorney can help you with the timing of everything. When the condo sales, it can make a difference depending upon where you are in settling everything. At least Medicaid does not take priority over the mortgage, so you will not have to walk away with two giant unpaid debts. The mortgage will be paid off, and Medicaid will be waiting in line. I would be concerned about whether or not I must pay 50% of any equity share to Medicaid at the time of sale. In our state it's at the time of sale, and cs hangs onto other half of equity. Maybe between the attorney and MERP if it's evident enough that you really need the money I hope you're allowed to keep it for your own support.

As others have written you need an atty to sort this out. Personally I'd look for a elder law atty who is in a larger practice that has probate atty's OR a tight affiliation with one. Why? Cause its both medicaid issues & probate laws involved. I'd suggest you get whatever MERP / estate recovery dealt with before you put the condo on the market. The goal of the attys being to get a release of any claim by the state (for what Medicaid paid) so that it's yours free & clear to do whatever with. You may need to establish exemptions & exclusions to show why recovery is not cost effective so dropped & release done. 40k equity is pretty low value, recovery may not happen. If it appraises at even less than 150k, well "value" could be even lower. Or could be that you'll need to open probate so that state has to place it's claim & if it doesn't then no recovery. It's not simple but needs an atty to strategize.

Echo the responses above. This is a topic that should be handled by an elder care attorney.

Houseplant - you really need to consult an attorney familiar with Medicaid issues. Medicaid is not being cruel - the situation with each person or couple differs and you cannot fairly expect free legal advice from them. It is up to you to get advice that fits your situation.

I'm in another state, w/ similar situation and have the same question. Our condo/mortgage values are approx. If I sale for 120K, the 30K remaining on the mortgage gets paid to the bank, Medicaid is very cruel in that it refuses to inform you or me of our options with the equity share if we want to sale after snf dies. My spouse and I have a big age difference too. So it makes a big difference in whether or not we have to pay the 50% upon sale of the condo. If you find out anything more, let us know.

Tottsie, if your hubby is being cared for by Medicaid in a nursing home, Medicaid, your best bet is to make an appointment with an Elder Law Attorney to see what would be the best route for you to take.

I think it is a great idea to downsize into something more affordable. It is good you are planning ahead.