My sister is due in August. She is giving my Husband and I custody of the baby. She is back in prison. She said she talk to her doctor about putting our names directly on the birth certificate, so we don't have to go through the adopting process. I was wondering if this is possible and if I should still get other legal documentation?

Depending on where you live, she cannot put you and your husband directly on the birth certificate as you did not give birth. You will need a family lawyer who specialized in adoption and you will have to go through the adoption process.

In the places I am aware of you can not be merely listed as the mother and father if you are not. That is fraud and I am sure no doctor will do this anyway.

You have to adopt to have proper and legal claim to the child

For the sake of the child and your family, contact a lawyer and make it legal. You have not idea what your sister might do later down the road and you would have NO legal grounds to stand on otherwise.