Prize, Lottery and Inheritance Scams Guide: Why You Never Pay to Collect

If someone says you have won a prize or inherited money, and you have to pay anything to receive it, there is no prize and no inheritance. Prize, lottery and inheritance scams are forms of advance fee fraud: the victim is persuaded to pay an upfront charge to release a large sum that does not exist, and then another charge, and another. They arrive by letter, phone, email, text and social media, and they hit older people and people who enter competitions particularly hard. This guide explains the main variants, how the money is taken, why the fake cheque trick catches careful people, what officials actually say, and how to report it in the UK and the US. It is written for individuals and families, and for anyone running scam awareness for older relatives, customers or staff.

Key takeaways

• Real prizes are free. The FTC states that legitimate prizes do not require fees for taxes, shipping or processing; paying a fee for a prize is a scam.
• You cannot win a draw you never entered. UK police describe being told you won a lottery you never bought a ticket for as a core warning sign.
• The fees never stop. Advance fee scams invent a new charge each time you pay: tax, legal costs, insurance, customs, bank transfer fees.
• A cheque in your account is not proof. The FTC explains that banks must make deposited funds available quickly, but it can take weeks to discover a fake cheque, and you must repay the bank.
• Officials do not award prizes. The FTC says it does not give, certify or verify prizes, and does not contact people to ask for money for any reason.

What it is

An advance fee scam is any scheme in which you are asked to pay something now in return for a larger amount later that never arrives. Police Scotland describes it as being "convinced to pay an upfront fee" for a prize, service, loan or goods. This guide covers the three variants built around a windfall:

• Prize and sweepstakes scams: a call, letter, email or text says you have won a car, cash, a holiday or a sweepstakes. The FTC notes scammers often claim to represent well-known sweepstakes companies, and genuine sweepstakes companies do not demand money for prizes.
• Lottery scams: you are told you won a jackpot, often an overseas lottery. UK police describe scammers posing as lottery officials who ask for personal details, copies of identity documents or bank information, and then fees.
• Inheritance scams: an overseas "lawyer" or "bank official" says a distant relative, or a stranger with your surname, has left you money. Police Scotland warns that you must pay several fees to release it, and may be sent fake legal documents to sign.

The older email versions are sometimes called 419 scams, after the section of the Nigerian criminal code that covers fraud, but today's versions come from many countries and increasingly arrive by social media message and phone. Advance fee loan, job and parcel scams use the same mechanics; see the Job and Task Scams Guide and the Parcel Delivery and Toll Text Scams Guide.

How it works

The typical sequence

1. The good news: an unexpected message says you have won or inherited a large sum. It often uses an official looking letterhead, seal or the name of a real company or government body. The FTC described a fake prize letter that used a photo of the FTC building and the agency seal.
2. Secrecy and urgency: UK police note that victims are urged to keep quiet and respond quickly or lose the prize. Secrecy keeps family and banks from spotting the scam.
3. Personal details: you are asked for identity documents, bank details or card numbers "to process the claim". These can be used for identity theft even if you never pay.
4. The first fee: a charge for tax, insurance, legal costs, courier or customs. The FTC's 2012 warning noted that insurers do not insure sweepstakes winnings, so an "insurance" fee is invented.
5. More fees: each payment is followed by a new problem that needs another payment. Police Scotland lists further fees before you receive anything as a warning sign.
6. Recovery scam: victims who stop paying may be contacted by a fake lawyer, official or "fraud recovery" service offering to get the money back, for a fee.

The fake cheque twist

Some prize scams send a cheque first. The FTC explains the trick: a sweepstakes notice includes a cheque, and to claim the prize you must send back money for "taxes", shipping or processing. Banks must make deposited funds available quickly, so the money appears in your account within days, but it can take weeks for the bank to discover the cheque is fake. When it bounces, you owe the bank the full amount, and the money you sent is generally gone. The FTC advises never using cheque money to buy gift cards or cryptocurrency, or to wire money to anyone who asks.

Warning signs and what they mean

Why it matters

These scams rarely end with one payment. Because each fee is presented as the last step before a large payout, victims keep paying to avoid losing what they have already sent. Older people who enter many competitions, or who live alone, are often targeted repeatedly, and their details may be passed between criminal groups. The personal information handed over along the way, such as passport copies and bank details, can also be used for identity fraud long after the contact stops; see the Identity Theft Recovery Guide.

The FTC continues to publish fresh warnings: in June 2025 it reminded consumers not to pay for a prize, and in March 2026 it warned that random calls saying "you've won a prize" are scams, including calls claiming to come from well-known sweepstakes companies.

Who to contact and how

See the Consumer Reporting Routes Map for every country route.

Common misconceptions

• "It is only the tax, which I would pay anyway." Genuine prize tax is not paid up front to the person awarding the prize. The FTC lists "taxes" as a scam fee.
• "The cheque cleared, so it is real." Funds being available is not the same as the cheque being confirmed. The FTC says discovery can take weeks.
• "They knew my name and address." Contact details are bought and sold. Knowing your name proves nothing.
• "A lawyer sent signed documents." Police Scotland warns that inheritance scammers send fake legal documents.
• "The letter has a government seal." The FTC has seen fake letters using its seal, and says it never asks for money.
• "I have paid so much, one more fee will release it." There is no prize. Every further payment is lost too.
• "I entered a competition recently, so this might be it." Check with the real company using contact details you find yourself, as the FTC advises, not the ones in the message.

Helping someone who believes they have won

• Stay calm and kind: people who have paid often feel embarrassed. Blame pushes them towards the scammer.
• Use the one rule: if you have to pay to collect, it is a scam. It is easier to accept than a long explanation.
• Check together: look up the real company or lottery operator independently and contact it.
• Reduce contact: help register for call blocking, and keep scam mail together as evidence.
• Bring in the bank: banks can flag unusual payments and may stop further transfers.
• Watch for recovery offers: warn them that anyone offering to recover lost money for a fee is part of the same scam.

The Cybersecurity for Seniors Guide covers broader protection for older relatives.

Related concepts

• Charity impersonation: in 2026 the FTC warned about scammers impersonating well-known charities to sell fake sweepstakes prizes. See the Charity and Disaster Scams Guide.
• Romance and investment scams: also use the promise of future money. See the Romance and Investment Scam Awareness Guide.
• Impersonation: fake officials, lawyers and bank staff. See the Impersonation Scams Guide.
• Gift card payments: why scammers want them. See the Loyalty Points and Gift Card Fraud Guide.
• Refund and overpayment scams: the same "send the difference back" trick. See the Fake Renewal and Refund Scams Guide.

Practitioner checklist

• Treat any request to pay a fee, tax or charge to receive a prize or inheritance as a scam, and stop contact.
• Ignore notifications for competitions or lotteries you did not enter.
• Never send identity documents or bank details to someone claiming to process winnings.
• Do not spend or forward money from an unexpected cheque, and never use it to buy gift cards or send wires.
• Verify any claimed win with the real company, using contact details you looked up yourself.
• If you paid, call your bank first, then the payment provider (gift card issuer, wire company), then report.
• Report to Report Fraud or Police Scotland in the UK, or to the FTC in the US, even if you lost nothing.
• Warn victims about follow-up recovery scams.
• In awareness sessions for older people, teach the single rule: if you have to pay to collect, there is no prize.

Standards and references

• Federal Trade Commission: You've Won Scams
• Federal Trade Commission: That random call saying you've won a prize is a scam
• Federal Trade Commission: Don't pay for a prize
• Federal Trade Commission: How to spot, avoid and report fake check scams
• Federal Trade Commission: No prizes from the FTC
• Police Scotland: Payment in advance scam
• Report Fraud
• Federal Trade Commission: Scammers exploit the FTC's good name, promise phony sweepstakes prizes

Related NHI Mgmt Group resources: Cybersecurity for Seniors Guide · What to Do If You Have Been Scammed Guide · Consumer Reporting Routes Map · Impersonation Scams Guide