I use the familyrootsorganizer.com system for my paper files with some variations. I pretty much apply the same system to my digital files.
With that said, to answer your question "BUT, how do I deal with the wife's family members?", a wife stays with her parents until she marries. That actually applies to both man and wife. Once a couple marries, they get their own folder. For me that is paper file folder and computer file folder. That couple having their own folder continues with all of their children until those children marry and the cycle continues. Normally the first document filed in the new couple's folder is their marriage license.