Reposting an answer I wrote a couple of years ago:
The Knights Templar, possibly the most famous of the "Big Three" orders (the others being the Hospitaller and Teutonic), was disbanded by Papal decree in 1312, although by that point the leadership of the order had been already been imprisoned for five years by Philip IV of France on charges of heresy in a massive round-up of Templars on Friday 13th of October, 1307. The build up to these events had taken place over the last few decades.
By the turn of the 14th century, the Mamluks finally captured the island-fortress of Arwad from the Templars, their last remaining bastion in the Holy Land, forcing the Templars to relocate their operations to the island of Cyprus. Essentially, this was the end of the crusader presence in the Holy Land, leaving the Templars without a cause. Their brothers in the other holy orders, such as the Hospitallers and Teutons had alternative missions to turn to, such as holding the island of Rhodes from the Muslims, or carving out a monastic state in the Baltics. The Templars had no such activity to point to as a reason for the continued support of Christendom; the loss of this support would not have been catastrophic, had the Templars not been accumulating resentment at an increasing pace.
The Templars were not simply the soldiers they are often portrayed as. They were certainly a military order, and two of the three classes of Templars had military roles within the order. The eponymous Knights were primarily there to protect pilgrims, while the Sergeants, who were most often the tradesmen and artisans of the order, were also called upon to fight when the need arose. The third was the Chaplains who tended to the spiritual needs of their brothers. Some estimates put their total membership at fifteen to twenty thousand strong, with about ten percent of that number being Knights. This is a substantial amount of people to feed, clothe, and shelter, which requires resources of an equally substantial amount.
Since the early years of the order, the Knights Templar had received certain benefits from the Pope, which had accumulated both the wealth they needed to operate, as well as the resentment referred to earlier. For starters, the Templars were unable to be taxed on any of their property, they answered only to the Pope, could travel through any border at will, and did not need to abide by any local laws. During the heyday of the Crusades, with the full backing of the Papacy, the Templars benefited greatly from donations of gold, land, and businesses, which only continued to grow with time, with their network of chapter houses allowing a effective form of banking to take place; pilgrims wishing to travel across Christendom could deposit their wealth in their local chapter house, receive a receipt, travel to where they wanted to go, then hand over their receipt to the chapter house there and receive their wealth back. This was infinitely safer than making the journey carrying your wealth, and of course the Templars took a cut of the wealth they protected. So by the time Arwad fell to the Mamluks, the Templars were a vastly powerful, wealthy, international order that was subject only to Rome. With the fall of Arwad, they had also lost their primary reason for existing, and so the sharks began to circle.
The privileges the Templars enjoyed often came at the expense of local lords, who lost sources of income from donations to the Templars, lost their legal jurisdiction in those donated lands, and had to put up with heavily armed bands of warriors tramping across their territory. Still, even with the loss of Arwad, the Templars could have continued. Like the Teutons and the Hospitallers, their mission could have adapted to the new circumstances, but we will never know, because Philip the Fair then struck.
Philip IV, called the Fair not because of his just nature but rather because of his good looks, was in a spot of economic trouble. I won't go into the details, but by 1305 the French coinage was only 30% precious metal, having been debased in a failed attempt to recover the economy. Philip was also fighting wars with far too much regularity to be healthy, and wars are frightfully expensive, and so the French king was resorting to ever more villainous ways to gain wealth. After expelling Lombard merchants and seizing their property, he then did the same to the Jewish population, as well as arranging a special tithe from the church, although he handled the reintroduction of wealth into the economy so poorly that there were riots in Paris. Philip took shelter from the rioters in the Templar citadel, where the wealth of the order would have been clear.
So in September 1307 the arrest warrants went out across his kingdom, with orders to arrest any local Templars in one months time, which went off without a hitch. Notably, very few Templars escaped these arrests, suggesting that both Philip's administration was startlingly efficient, and also that the Templars were clearly not overwhelmingly popular. The Grand Master, Jacques de Molay, was attending the funeral of Philip's sister-in-law when he and sixty of his fellows were arrested. In November, Clement V dispatched the Pastoralis Praeeminentiae, which called for the immediate arrest of all Templars.
The Templars were accused of heresy and grevious sins, including homosexuality, bestiality, spitting on the cross, the worship of idols, and incorrect conduct of mass by Templar chaplains. What followed were mass tortures of Templars, leading to confessions of these charges as well as a raft of other crimes. Pope Clement V was the first Avignon Pope, essentially a French puppet, although he did attempt to rein in the tortures by demanding certain conditions of the trials, with torture only to be used when the accused would not testify either way. Since Philip remained the jailer of the Templars, he arranged for them to be tortured anyway. Still, the Templars began to adequately defend themselves, especially since many Knights were noble-born and had received some education in the law. The Grand Master, Molay, repeatedly recanted his confessions the moment he was in front of a Papal commission and away from the royal agents, only to succumb to torture when back in their custody and repeat his recantation all over again.
The resistance of the Templars was largely destroyed in 1310, after three years of trials and torture. Philip, using the previous confessions, as well as the recanted confessions, to have fifty four of the men that had been arrested alongside Molay dragged out of Paris and burnt at the stake. Less than a week later, another nine Templars were burnt thirty miles north of Paris. Philip's threat was clear as day; play along, confess your 'sins', and accept the punishment. Or die screaming. The vast majority did so, serving their sentences in prisons, but otherwise surviving. In 1312, the previous mentioned Papal edict, Vox in Excelso, was enacted, and across Christendom the repression of the Knights Templar began, although with varying levels of severity. In England, for example, Edward II dallied and pretended to fulfill the Pope's will, but largely left the Templars alone. Contrarily, in Cyprus, the Templars base, they would be involved in a standoff with the local military as well as their Hospitaller brothers, although it was largely bloodless. In France, where this had all began, the trials continued without much difficulty, after the example made by the firey deaths of sixty-three of their fellow Templars, until it came time to sentence the Grand Master in 1314. Using his previous confessions, Molay was to be sentenced to life imprisonment, but as the sentence was about to be laid down he, along with three of his surviving comrades, stood and denounced the trial as a farce. I'm going to quote a 19th century historian here, Henry Charles Lea, mainly because his account is brilliant reading:
They had been guilty, they said, not of the crimes imputed to them, but of basely betraying their Order to save their own lives. It was pure and holy; the charges were fictitious and the confessions false. Hastily the cardinals delivered them to the Prevot of Paris, and retired to deliberate on this unexpected contingency, but they were saved all trouble. When the news was carried to Philippe he was furious. A short consultation with his council only was required. The canons pronounced that a relapsed heretic was to be burned without a hearing; the facts were notorious and no formal judgment by the papal commission need be waited for. That same day, by sunset, a pile was erected on a small island in the Seine, the Ile des Juifs, near the palace garden. There de Molay, de Charney, de Gonneville, and de Peraud were slowly burned to death, refusing all offers of pardon for retraction, and bearing their torment with a composure which won for them the reputation of martyrs among the people, who reverently collected their ashes as relics.
That was effectively the end of the Templars. Survivors were either imprisoned, let off, or merged with other military orders, and their vast wealth disappeared into the purses of various lords, Philip the Fair first among them. Philip and Clement were both short-lived, though, with Clement dying suddenly within a month of Molay's burning, and Philip being mortally wounded during a hunting trip before the year was out.
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