Here is the recipe I am using:

http://allrecipes.com/Recipe/carrot-cupcakes-with-white-chocolate-cream-cheese-icing/Detail.aspx

I am in the middle of making this as I type this and something has gone horribly wrong! I melted the chocolate, let it cool, mixed the butter and cream cheese together and then added the white chocolate. When I added the white chocolate and then mixed it for a little to incorporate, the white chocolate hardened and I now have chunks of white chocolate in my frosting.
What happened?
I have no problem redoing the frosting if someone could give some advice as to what I did wrong or if there is some way to save the bath that is sitting in my Kitchenaid mixer.

Thanks!

Was your butter and cream cheese cold?

Room temp or a little under but not like 'straight from the frigde' cold.

What kind of chocolate did you use. When I use Ghirardelli, I don't have this problem. But the last time I added white chocolate to frosting, I used Merckens white chocolate chips. Ghirardelli, has cocoa butter and Merckens has vegetable oil and both will react different ways. When I used the Merckens, it hardened up on contact and I had little grains of white chocolate in the frosting.

So my guess is it is the chocolate you used.