If you target two cards and one of the targeted cards becomes illegal, you’ll still return the other one, discard a card, and exile Shreds of Sanity. If each targeted card becomes illegal, Shreds of Sanity doesn’t resolve and you won’t discard a card or exile Shreds of Sanity.

You may discard one of the cards you return to your hand. If you have no other cards in hand, you must discard one of the cards you return to your hand.

You may cast Shreds of Sanity with just one target. You may also cast it without any targets if you just want to discard a card.