Well objects can't really be possessed unless they have a will of their own since possession has to do with an entity entering and controlling the host which usually has or had a will of it's own, though various entities can inhabit objects, but it's not the same thing. As to what would happen, that depends on the demon/spirit/etc. Generally it won't be to happy about the object it's in being destroyed, like sitting in a clubhouse and someone tears it down. Depending on what your dealing with and it's intent it may just leave, or stir up trouble, or, worst case scenario, it may come after you to get back at you in some major way (its not likely to happen, but you can't rule out the possibility).
never heard of wands being possessed, but i'd cleanse it and protect it. if you were to break a wand, i think you'd just have to make a new one. the wood the wand is made from will give it power [like if it's made from apple it would be good in love spells] but the main source of its power comes from the witch using the item. breaking it won't release some evil dark energy or something. just means you need to make a new one.