If you plan to leave an inheritance behind, you should know what is and is not taxable in your estate. If your heirs receive a tax bill as a consequence of their inheritance, they may not have the cash to pay that tax bill, especially if most of your estate is comprised of a non-liquid asset, such as a home or business.

Fortunately, there are ways to ensure loved ones left behind don't wind up with a big bill to pay upon inheriting your estate.

Here are four steps to find out if your estate may owe taxes and how your heirs can come up with the cash to pay the bill.

1. Estimate your estate

Your taxable estate is essentially any property that you own in your name. This includes all of your checking and savings accounts, as well as your stock and bond portfolio.

It also includes non-liquid assets, such as your home, cars, boats and businesses that you own entirely or as a partnership. If you already own a life insurance policy, the proceeds may also be added to your taxable estate.

2. Tally potential taxes

Your estate tax bill is based on the value of your estate beyond the tax exemption, which is currently $5 million. Obviously, few people have to worry about these taxes now. However, the exemption may drop substantially in upcoming years.

In fact, it's due to expire at the beginning of 2013 unless Congress changes the law. The exemption would then drop to $1 million.

For property that's valued above the exemption amount, the current federal estate tax rate is 35 percent. But in 2013, the rate will go up to 55 percent unless the laws are changed.

In addition, some states also have their own estate taxes, and many have lower exemption levels. In New Jersey, for instance, the state tax exemption is currently $675,000. It's important to talk to an estate tax planner to determine if you may owe state estate taxes where you live.

3. Increase liquidity

If your heirs will have to pay an estate tax, it's important that they have the cash to pay the bill.

One way to help them come up with the funds is to buy a whole life insurance policy. Your beneficiaries can use the proceeds to pay the bill so they won't be forced to sell a home, farm, business or other non-liquid estate asset.

Depending on your age and health, a whole life insurance policy can be purchased for a small percentage of its face value. Unlike a term policy, you can't outlive the benefits, so your heirs can be assured that it will be there when needed.