Order of operation with LTRIM/RTRIM/ISNULL
Your tests are redundant. First both LTRIM and RTRIM return NULL when given NULL input:

declare @Test1 varchar(16) = null;

select
    lft = LTRIM(@test1),
    rgt = RTRIM(@Test1);

lft              rgt
---------------- ----------------
NULL             NULL


Second, standard SQL ignores trailing spaces when comparing strings:

select
    A =case
        when '' = '   ' then 'equal'
    end,
    B = case
        when '  ' = '     ' then 'equal'
    end;

A     B
----- -----
equal equal


SQL Server provides the NULLIF function. This takes two parameters. If they differ the first will be returned. If they are equal it will return NULL. I think this will address your requirement.

declare @Test1 varchar(16) = '    ';

select
    first = nullif(@Test1, '');

set @Test1 = NULL;

select
    second = nullif(@Test1, '');

set @Test1 = 'some value';

select
    third = nullif(@Test1, '');

first
----------------
NULL

second
----------------
NULL

third
----------------
some value


You may still need the LTRIM, depending on your input validation.