Susan Atkinson, 64, was found dead at her home in The Rydales, Hull on October 21, last year.
She had more than 100 injuries to her head, neck and body, after she was attacked by her neighbour Sherry Moore, who left her lying dead beneath a stone bird bath.
Moore, 55, had suffered with mental health issues for a number of years had previously been admitted to hospital under the Mental Health Act at least six times with bipolar affective disorder.
She had been receiving treatment in the community, but had not been taking her medication at the time of the attack and believed she was under threat from people who were "out to get her".
Moore was today sentenced to an indeterminate hospital order and a restraining order following a hearing at Sheffield Crown Court.
The court heard how Moore had previously stabbed her two-year-old son, hit a friend over the head with a bottle and tried to run over a police officer in Scarborough.
An internal investigation by the NHS will now take place.
In a statement, Mrs Atkinson's family said: “Susan was completely unaware of the danger lurking so close to her home when she was violently attacked and killed in her own back garden – a place where she should have been safe.
“She was only 64. She was kind, loving and fun. She was a good person and her death has absolutely devastated her entire family and all her friends, leaving a huge hole in all our lives.
“Sherry Moore has now been sentenced and we have been promised by the NHS that an internal investigation will be carried out to identify if anything could have been done differently.
“We strongly believe it is important that lessons are both to help those individuals who need their support and protect those around them.
“No other family should ever have to suffer what we have been through again.”
Sheffield Crown Court heard how Moore had initially blamed her brother for the attack, but later told officers: "I'm a bad person, I killed a lady, I need to be in prison. She was my next-door neighbour, I'm an evil person."
Passing sentence, His Honour Judge Paul Watson QC said: "The injuries were horrendous, and it is clear that the attack was sustained and savage.
"What you did, and for whatever reason, was a terrible thing."
Prosecutors said a friend discovered the Hull City of Culture volunteer lying with a stone bird bath on top of her, and Moore was arrested.
The judge said of Mrs Atkinson: "She was for everyone a loving person, well liked and adored by her family and friends.
"She had no reason to think, other than past unpredictable behaviour that she observed from you, that you would behave in the way that you did on October 20 last year.
"It was substantially if not entirely attributable to your substantial mental illness.
"What we do know is that the attack which led to her death was very serious and in many ways brutal."
Patrick Palmer, prosecuting, said the defendant, who has been diagnosed with a separate "schizo-affective disorder", had initially tried to pass the blame for the attack, before admitting it and telling officers: "I pushed something heavy, it fell on her, I didn't think it would make her die."
The barrister said she appeared to be exhibiting symptoms of psychosis at the time of her arrest, saying: "She had consistently reported that she believed she was under threat and unknown people were out to get her. She clearly was not acting rationally."
The court heard that the defendant later told doctors she had been admitted 12 times to psychiatric hospital.
The judge said he had received a letter from Moore in which she expressed her regret for what had happened, telling the court: "She has significant insight into what she has done and clearly now better expresses a substantial degree of remorse for her conduct, but that only goes so far."
Detective Chief Inspector Alan Curtis, who led the investigation by Humberside Police, said: "“Today’s sentence means that Sherry Moore can no longer pose a danger to the public and she is guaranteed to receive the care and support she needs.
“However, that cannot return Susan Atkinson to her loving family and friends, who have been left devastated by her death.
“Susan was a well-loved member of the community, who had spent the previous day doing volunteer work in the city with friends, and she will be sadly missed by all who knew her.
“Thankfully, incidents of this kind are extremely rare in our area and we quickly identified that Sherry Moore was the person responsible for Susan’s death, ensuring that no one else was at risk of harm.
“Our thoughts remain with Susan’s family and loved ones.”