To protect my house as an asset, my attorney drafted/created what is colloquially known as “a poor man’s trust” where my two sons and I are now listed on the deed and all three need to consent for sale. How does this affect the $250,000 capital gains tax exemption upon sale?
I think you got very bad advice. It sounds like your “attorney” was fixated on avoiding probate, at the exclusion of other issues. What you did was transfer the house out of your name to the three of you, as joint tenants with right of survivorship. Upon the death of one of you (presumably you first), the surviving two (presumably your sons) would automatically own the property without probate. However, if you sell the house while you are living, your $250,000 exclusion can only be applied against your 1/3 portion.
There are other problems here as well, tax and otherwise. I would never advise a client to put their home at risk. Your home would be at risk from your sons’ creditors. Also, your home, or at least a third of it, would still be vulnerable to your long-term care costs and Medicaid.
A trust will keep you in control of your entire property, protect it from Medicaid, preserve the effectiveness of your entire $250,000 capital gains exclusion, and obtain a full step-up in tax basis on the property upon death.