Peter Ward was accused of murdering his family, but thought to be insane. He was sent to Greenhaven.
He was eventually released. As Will Atenton he creates the family and story he needs to exist in his old house, while only seeing it as it used to be... thus making his way back to his home. There, he eventually uncovers who he is and who actually did kill his family. The audience learns why his wife shot him at this time.
When was Peter in Greenhaven? After his family was killed. Why was he considered nuts? He insisted that he was innocent despite the evidence and lack of other suspects. The death of his family fractured his personality and drove him temporarily insane, to the point where he created his alter-ego of Will Atenton.