I have been raising my nephew since he was an infant. He is now three and my sister and his father have decided they want to sign over their rights and give him to me permanently. Do I need to file adoption papers or if I should file for custody/guardianship?

Is there a current legal arrangement? It seems, from your description, that you would want to try kinship adoption. This would sever any obligation on the parents to provide any support for the child, and can be very confusing if the parents are still around. If the parents still intend to be involved, you may want to become a guardian or come up with a custody arrangement that is acceptable to the courts. The process will depend on where you are located.

Where? It varies. If you want to PERMANENTLY raise the child, become the parent, then you AND YOUR HUSBAND OR SIGNIFICANT, LEGAL OTHER, file to adopt.

If you want an arrangement that can be changed or overturned, then it's guardianship.

This must be done properly. You need an Attorney.